A pragmatic move

With GST uncertainty over, time to focus on unfinished tasks

Two major decisions were taken at the meeting of the Goods and Services Tax (GST) Council on Monday, setting at rest the uncertainty over both the administrative jurisdiction and the date for rolling out what will be the country’s biggest indirect tax reform. It has been decided that 90 per cent of assessees with up to Rs 1.5 crore in annual turnover will be administered by the states, leaving only the remaining 10 per cent with the Centre. For assessees above this threshold, the Centre and the states will have an equal jurisdiction, with a computerised system allocating 50 per cent of such assessees to the states and the remaining 50 per cent to the Centre. The novel solution uses technology to ensure that no assessee comes under dual control — a fear that had unnerved many a business establishment.

Barring West Bengal, all other states appear to have agreed to the new formula for sharing the administrative jurisdiction for GST — an issue that had become a bone of contention, threatening the deadline for introducing the new tax. It is an edifying spectacle in a country otherwise riven by fractious politics that the states and the Centre have reached an accommodation to facilitate the implementation of a major tax reform. What augurs well for the launch of the new tax regime is that the Centre showed pragmatism and made some significant concessions — coastal states have been allowed to collect taxes on sales of commodities on high seas and also petroleum products when they are eventually brought under the purview of GST.  

More reassuring has been the decision to postpone the date for rolling out GST to July 1 from April 1. Not much will be lost by postponing the GST roll-out by a mere three months — the country has been waiting for this tax regime for almost a decade — particularly because the uncertainty is now over. However, the government has to remain on guard for many reasons. 

The tasks of finalising the specific laws to implement the new tax are by no means over. Not only must the Centre have the legislative bills for the central GST and the inter-state GST passed by Parliament, all the states, too, must secure the passage of the model state GST bills in their respective Assemblies. There is no room for any slippage if the July 1 deadline has to be honoured and the states must complete the process during their respective Budget sessions. The Centre also needs to be conscious that the results of elections to five Assemblies will be out on March 11. Irrespective of the nature of the poll outcome, the Centre must remain focused on rolling out GST by the target date and not lose the spirit of political pragmatism. The political temperature after March 11 might run high, but the central leadership will do well to rein in obstructive forces that might threaten to jettison GST. At the level of the GST Council, there will be need for close monitoring so that the tax bureaucracy, industry lobbies and politics are not allowed a free play in accentuating the distortions in a GST regime already flawed by a multiplicity of rates and a plethora of exemptions. Most importantly, Finance Minister Arun Jaitley will be well advised to use his forthcoming Budget to align excise and service tax rates to bring them closer to levels that will prevail under GST. The pain of adjusting to a new regime will then be that much less.