The postponement of the meeting of the Goods and Services Tax (GST) Council by a week should not give rise to any uncertainty over rolling out the tax from the scheduled date of April 1, 2017. But, the manner in which the GST Council’s meeting was postponed, and the nature of the political circumstances at present, should certainly cause some concern. Officials of the Union and state governments met for two days earlier this week to discuss the draft Bills for the central GST, state GST and integrated GST as well as the financial compensation to states. A number of procedural and taxation-related issues were resolved, but the states sought more time to examine the draft laws in consultation with stakeholders. The demand for more time is unexceptionable even though it does delay the process a bit. But, it would be naive to believe that the states’ demand is just for a review of these Bills. Indeed, the demand extends to also seeking procedural changes for filing tax returns and claiming compensation. Finance Minister Arun Jaitley took the initiative of holding a special meeting with state representatives last Sunday, but to no avail.
Central and state officials are expected to meet in the next few days, but what has added to the concern over a delay in the roll-out of the GST is the fractious politics that has been triggered by the Centre’s decision to demonetise high-denomination currency notes. The Opposition mood in Parliament had turned favourable in the monsoon session, leading to the passage of the constitutional amendment Bill to pave the way for the GST. That mood has now changed, resulting in continued disruption of proceedings in both Houses of Parliament. This has also cast a shadow on whether the GST Bills will even be passed in the current session — one of the necessities if the tax has to roll out from April 2017. Leaders across party lines must work towards allowing discussion in Parliament. They should debate not just demonetisation but also the GST Bills so that these can be passed before the winter session comes to an end on December 16. In such circumstances, the government is likely to rush into taking decisions with regard to provisions in the GST Bills and even cut corners. However, it would be ill-advised to tread such a path.
So far, the Centre has ensured that decisions at the GST Council meetings are taken by broad consensus and it should not give short shrift to views from the states in its hurry to meet a deadline. There are also suggestions that the government could treat the various GST Bills as “money Bills” so that these can be passed by the Lok Sabha, obviating the need for an explicit approval from the Rajya Sabha, where the ruling National Democratic Alliance is yet to enjoy a clear majority. Going by the proposals of the council, the GST regime will have many imperfections, thanks to multiple rates, several exemptions and procedural complexities. But, the GST is a structural reform of the indirect tax regime and instead of treating the deadline as inviolable, the council should try to arrive at fewer rates and fewer exemptions lest the reform loses all efficacy.
