Business Standard, December 19, 2013

The proposed Goods and Services Tax (GST) would have far more repercussions for the Union finance ministry and the way the Budget is prepared than is understood. At least, that is what former finance minister Yaswhant Sinha thinks. He also believes the Centre would surrender much more authority in the new indirect tax regime than state governments would.

“While states are afraid of GST, nobody is looking at the concerns of the Government of India. Nobody is bothered about what is going to happen to the functioning of the ministry of finance and the making of the Budget of India,” said Sinha, who chaired Parliament’s standing committee on finance, which recently submitted a report on GST.

It was proposed as part of GST introduction, he said, to have a council headed by the finance minister but the deputy head was to be a state finance minister. Decisions were to be taken unanimously or by a two-thirds majority, he said in a lecture organised by CUTS International.

States would 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. Adding: “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 it to the GST council and get it approved?”

The Centre, he said, would surrender far more authority in the GST than the states. “The future finance minister, after GST comes into force, will encounter all this problem.” Sinha also criticised the Planning Commission for micro-managing state finances. “Instead of doing perspective planning, it is today trying to micro-manage the states’ finances and state functioning,” he said. The body, he added, was the biggest obstacle in the path of federalism

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