GST cap must for our support: Congress

It needn't be in the Constitution amendment but the subsidiary legislation must do so, it contends

The Congress party will support the Goods and Services Tax (GST) Bill in the Rajya Sabha if there is a cap on the tax. Not necessarily in the Constitution amendment legislation, which will be hard to amend but at least in the main GST Bill, which can be changed by simple majority.

This is the party’s bottom line but so far nobody from the government has contacted it to take this discussion forward.
 

The current 200-page GST draft Bill mentioned a rate but does not describe how this can be changed — no formula or any other method. Nor does it term this a cap, implying it can be revised upwards whenever the government wants, without restriction.

This is the Congress’ argument.

Praveen Chakravarty, senior fellow at IDFC Institute, a Mumbai think tank, puts it this way. He says there has been a 127 per cent increase in petrol taxes and a 386 per cent increase in diesel taxes, both indirect levies, from 2014 to February 2016. The Central Excise Act gives the government the untrammelled power to continue raising tax rates. The only way Indians can prevent this is to vote the government out in elections.

GST is also an indirect tax. Technically, then, GST rates can also be subject to limitless changes without a proper parliamentary process, top party leaders say.

Chakravarty says, “When Anand Sharma (the party’s head in the Rajya Sabha) says the rate should be ring-fenced, he is not talking necessarily about the Constitution amendment Bill. But, how the rate can be changed must be mentioned somewhere in the legislation.”

Party Vice-President Rahul Gandhi used this argument to push for changes in the Bill when he articulated his views on the tax change at a meeting with foreign investors recently.

The political economy of the argument is that the poor must be protected from the effect of arbitrary changes in the rate. If this is to be done, the upper limit must be mentioned in the legislation. The party says only because the government cannot collect the direct tax it needs from the rich cannot be the reason for it to collect this via GST. Which will, when rolled out, affect the poor more than the rich, given India’s pattern of consumption.

Although the Constitution amendment Bill authorises the proposed GST Council with the right to change the rate, Chakravarty argues that whether Uttar Pradesh or Mizoram, all states have the same vote – one – in the body. This is not a scientific or representative way of addressing the issue, he contends.

Sharma, Congress’ deputy leader in Rajya Sabha where the Constitution Amendment Bill on GST is stuck, has reportedly said that his party was open to discussing its demand of including the tax rate in the Bill if the government were to come out with a suggestion to “ring-fence” the tax rate.

Draft model GST law

There shall be levied a tax called the Central/State Goods and Services Tax on all intra-State supplies of goods and/or services at the rate specified in the Schedule . . . to this Act and collected in such manner as may be prescribed. 

The Constitution Amendment Bill, as passed by the Lok Sabha says the rates will be recommended by the proposed GST Council, comprising Union finance minister, minister of state  for revenue and state finance ministers. 

The Centre will have one-third voting power, and states combined will have two-third. 

The recommendation to change the rates can be made by three fourths majority in the Council. So, neither the Centre alone nor all states combined alone can effect a change. 

The Congress however, feels this is not an adequate safeguard.