The Centre seems to think that it will be able to roll out the goods and services tax (GST) regime throughout the country by 2015, but the continuing opposition to it from state governments — because of political compulsions or other reasons — could see the negotiations go either way. The one man who’s remained doggedly opposed to GST has been Raghavji, Madhya Pradesh finance minister. So strong are his views on the issue and so consistently has he voiced them on various fora over the years that he’s probably emerged as the one person but for whom GST would have been a reality today. Even after Sushil Modi, chairman of the Empowered Committee of State Finance Ministers, declared at the recently-concluded Bhubaneswar meet of the committee that there was a broad consensus on GST, Raghavji did not budge from his stance.
Raghavji had even told then finance minister and now president, Pranab Mukherjee, that if he liked GST so much, he could simply rename VAT as GST instead of pushing for a new tax system. Insiders say Mukherjee lost his cool and snubbed Raghavji for his “stubborn” attitude.
GST, in the prescribed form, would not serve any purpose, the 79-year-old feels, and is “full of prejudices”. “The Centre’s objective is to strip states of their taxation powers and encroach on their tax domain. They want it [GST] in favour of manufacturers and big market players. No one cares for commoners.” He has also warned of challenging the decision in court if GST is forcefully imposed.
What has lent weight to his opposition is the fact that Raghavji is a tax consultant who, through the nine years that he’s been the finance minister of Madhya Pradesh, has maintained a balance in his tax initiatives, introducing tax-reforms and rationalising taxes, while being tough with evasions. In fact, tax collections have gone up by as much as 19 per cent during his tenure and the state’s fiscal deficit is below 3 per cent — much lower than that of the Central government.
People say it’s not that Raghavji opposes GST because he is close-minded or does not understand it. “He knows it will be politically a wrong move to support GST. He says he does not oppose GST, but its timing,” says one official. Raghavji has proposed an alternate GST model designed by A P Shrivastava, principal secretary (commercial tax), which he feels is better and will be implemented if BJP comes to power in 2014. Besides, he asks, “Why does the UPA want GST implemented in a hurry when elections are nearing?”
No wonder, despite being the senior most member of the empowered committee and attending every meeting since 2009, he was passed over when a successor was being considered for Asim Dasgupta in mid-2011, after the Left Front lost power in West Bengal. Raghavji’s name was the first to be considered for the post — but “because of his strong opposition to GST, it was decided to give a chance to someone who could help take forward the talks between the Centre and states,” says an official familiar with events of the time.
Even the foreign tours organised by the empowered committee to make the states see the logic of the Centre’s GST plans failed to change Raghavji’s views. In fact, he says, the visits re-affirmed his reservations. On one of these trips, he told the French minister for foreign trade that India, which has not introduced yet GST and had varying VAT rates across states, had a better GDP growth rate than France. “No government, federal or state, in any country is willing to adopt GST,” he says. “British Columbia in Canada has refused GST by public referendum.”
Though the Centre needs the support of only half of the states to introduce GST, it will find it difficult to ignore a large state like Madhya Pradesh. Raghavji, along with other key BJP state finance ministers like Saurabh Patel of Gujarat, hold the key to GST implementation.