Business Standard, December 18, 2013

Hints that since states will have majority in GST council, and union finance minister may not be able to get key proposals passed

The proposed Goods and Services Tax (GST) seems to have far more repercussions on the union finance ministry and the way the Budget is prepared than is understood now. At least, that is what former finance minister Yaswhant Sinha thinks. He also believes that the Centre will surrender much more authority in the new indirect tax regime than states.

“While states are afraid of GST, nobody is looking at concerns of the government of India. Nobody is bothered about what is going to happen to functioning of the Ministry of Financeand the making of the Budget of India,” Sinha, who chaired the Standing Committee on Finance that submitted its report on the GST to Parliament, said.

Explaining, he said GST proposed to have a council headed by the finance minister, but the deputy chairperson of that body will be a state finance minister. Decisions will be taken unanimously or by two-third majority, he said at a panel discussion organised by CUTS International.

Now states will have a majority in the GST council. “Can the (union) finance minister impose a surcharge and get away? The GST Council will reject it,” he said. “The GST council would say whatever you may do we must have our pound of flesh. How will you prepare the budget? Would you take the budget to the GST council and get it approved?” Sinha asked.

He said the Centre will surrender far more authority in the GST than the states. “The future finance minister, after GST comes into force, will encounter all this problem,” he said.

The constitution amendment bill to enable GST roll out could not be introduced in Parliament which was adjourned sine die today. This was so because states had rejected the Centre’s proposal to include alcohol and petroleum products within GST framework.

Sinha criticised the Planning Commission for micro-managing the states’ finances. “The Planning Commission instead of doing perspective planning is today trying to micro-manage the states’ finances and state functioning,” he said.

The Planning Commission is the biggest obstacle in the path of federalism, he added.

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