Consensus 'intact' in GST Council despite Sushil Modi, Mitra differences

Differences pertain to past and now almost defunct empowered committee of state FMs

There have always been differences on political lines in the GST Council, but that has not come in the way of building a consensus on various decisions, be it the rate cuts or simplifying the procedures. Differences aired by Bihar Finance Minister Sushil Modi and his West Bengal counterpart Amit Mitra may not turn out to be an exception to this.

The differences between the two were on now an almost defunct empowered committee of state finance ministers and what happened in the past when the GST was being debated. Mitra also criticised the hasty implementation of GST which he said has hit the small and medium sector hard, but he was also a party to its implementation even as he initially wanted a deferment. 

The GST Council, chaired by union finance minister Arun Jaitley, has taken away the most important function of deliberations on GST from the empowered committee.

This could be gauged from the fact that empowered committee's agenda for Thursday included discussions on state revenue resources outside GST, the 15th Finance Commission constituted recently and the scope of taxation powers of states in the Constitution.

Earlier, Modi had questioned the mandate of the empowered committee to discuss revenue and taxation powers of states after the constitution of the GST Council.

At a Ficci AGM on Thursday, Mitra, and Modi differed over what happened in the past in GST when Gujarat and Madhya Pradesh had voiced opposition to some aspects of GST. Mitra said Madhya Pradesh and Gujarat had earlier opposed GST, but Modi disputed this. 

Modi said that Gujarat and Madhya Pradesh had not objected to GST per se but had only raised concerns over issues such as taxation of interstate commerce.

Mitra also said hasty implementation of GST which he said has hit the small and medium enterprises.

He said GST collections dipped in October because “production by MSMEs declined by almost 40 per cent”. He expressed apprehensions that the November figures could decline further. 

"This is a warning sign that a system created in hurry, which I opposed, is not working today and at the cost of small and medium enterprises. They are crying across the country...We have to correct the system," he said.

He added compensation to states for revenue losses due to an imposition of the GST stood at ~39,111 crore in the four months since July. 

While differences between Mitra and Modi over earlier opposition by Gujarat and Madhya Pradesh to GST and empowered committee do not matter much when it comes to GST, the former's criticism of the way GST is being implemented does matter. 

However, the likelihood is that there would be a further course correction in GST implementation such as further tweaking of rates at the topmost slab of 28 per cent, but all decisions are likely to be taken on a consensus.