GST isn't a reform that can fetch votes: Sushil Modi

Interview with Chairman, Empowered Committee of State Finance Ministers

Every time the Empowered Committee of State Finance Ministers meets outside Delhi there is some positive development on the Goods & Services Tax (GST). Negative List for taxation of services got the states’ go ahead in the Bhopal meeting last year, while it was agreed to have a floor rate with a narrow band for GST at the Bhubaneswar meeting in January. However, at the Mussoorie meeting last week the states could not form a uniform view on many of the items on the agenda. In an interview with Vrishti Beniwal, EC Chairman Sushil Modi says even a broad consensus can help roll out GST but the Centre would have to address the genuine concerns of states. Edited interview:

The Mussoorie meet failed to build a consensus on issues like threshold, revenue neutral rate and dual control. Why are you moving at a slow pace?
These are not very big issues. We can resolve them in seven days or 15 days. The biggest issue is the GST network. Without rolling it out you cannot implement GST. Only a few days back it was incorporated as a company. The system will require time to stabilise.

The Constitutional Amendment Bill is pending in Parliament and until that it is passed nothing can move ahead. We are at the same time preparing ourselves by doing the work of GST Council. So when the GST comes it will take much less time to implement things. Another big issue is revenue neutral rate (RNR) and it would take time because we don’t have the relevant data.

It should neither be so low that states incur losses nor be so high that the traders feel the pinch. Similarly, on Integrated GST there is no dispute but we are yet to figure out how transaction from one state to another would be taxed. Prior to P Chidambaram becoming the Finance Minister everything went into cold storage but since September things have started moving very fast.

You are saying there is a broad consensus on 80 % of the issues. But Madhya Pradesh finance minister Raghavji recently said there is no agreement and things stand where they were before September.

I will not comment on that. But always there will be one or two states putting dissenting voice because they are concerned with the state government revenues. In a democracy there cannot be a 100 % unanimity. There is a broad consensus on 80 % of the issues but on some point Punjab is not agreeable, on some other point Harayana has got issues. Even on Value Added Tax there was not complete unanimity.

The opposition to GST is mainly from two BJP-ruled states—Madhya Pradesh and Gujarat. Is it that the BJP also knows GST is a good reform and the ruling coalition should not be allowed to take credit for it?

It is not a question of the BJP or the Congress. There is Congress government in Haryana. There are concerns regarding revenue. Gujarat is having more than Rs 5,000 crore of revenue from Central Sales Tax. Harayana has revenue of more than Rs 1,500 crore from purchase tax.

There are so many other BJP-ruled states which are not opposing but they also have some issues. All those are relevant issues and need to be addressed. This is not a reform which will fetch votes to any political party. Even after implementing GST, no one would even mention it in the subsequent elections. It all depends on when the Parliamentary Standing Committee submits its report.

Finance ministry officials say once GST is rolled out there won’t be any losses to the states. Then why are states worried?
If losses are not going to be there then what is the problem in giving assurance to the states? Losses are bound to be there because cascading would be removed. Ultimately, there will be gains but in the initial years there would be losses because of phasing out of central sales tax.

Trade, which will be impacted most by GST, has not been seriously consulted so far on the issue. Why don’t you involve them and try to understand their concerns?

We are always interacting with the trade. At all-India level there are very few organisations representing trade. At the state level, states are in touch with local trade bodies. I will be convening a meeting in the next few states with all 11 special category states in Shillong.

We will try to understand how GST would affect those states, especially north eastern states because they have excise exemptions. At another meeting in Delhi we will invite major trade and business organisations to discuss all pending issues on exemption, threshold and take their feedback on all those issues.

Do you think the Centre has become more accommodative of states’ concerns in the last few months?

Earlier the constitution amendment bill on GST was hurriedly introduced in Parliament. There was a general consensus among states on many issues which was not incorporated in the Bill. Now the Centre is ready to incorporate those views.