Finance Minister Arun Jaitley on Wednesday began initial moves on India’s most ambitious indirect tax reform, the Goods and Services Tax (GST), one of the main election planks of the BJP but opposed by two prominent states ruled by the party, Gujarat being one of them.
Jaitley showed special interest in developments in the area of GST when he met revenue officials who apprised him on challenges faced on the revenue front and shortfall in tax collections.
During a presentation by Revenue Secretary Rajiv Takru, the finance minister also expressed a desire to meet chief ministers of various states to get first-hand information on what has led to the delay in implementation of GST.
The single most important tax reform initiative in India since independence, GST, which is expected to boost India’s economic growth by about 2 per cent, was first scheduled to be rolled out in 2010.
But it has since missed several deadlines due to opposition from BJP-ruled states.
Former finance minister P Chidambaram, who was keen to see two tax legislations — GST and DTC — passed by the Parliament during the tenure of the UPA government, had recently gone on record saying BJP-ruled Madhya Pradesh and Gujarat were stalling GST.
Prime Minister Narendra Modi, who was chief minister of Gujarat for 12 years, however, had said during his campaign that he favoured GST but emphasised that tax reform could be implemented only after taking all states into confidence.
The BJP manifesto too had talked about implementation of GST by “bringing on board all state governments in adopting GST, addressing all their concerns”.
States are opposed to the shift in balance of fiscal power between them and the Centre and that is primary reason for their opposition.
In the proposed GST Council, Union and state finance ministers will collectively take decisions like fixing rates of tax and exemptions from the levy, the power for which lies solely with the states. Once GST is in force, it will be levied on consumption of goods and services, while states such as Gujarat and Tamil Nadu are net exporting states.
There is a proposal to compensate such states for the revenue they might lose after they shift to a GST regime, but there is also disagreement on quantum of compensation.
GST is expected to lead to buoyancy in government revenues by Rs 1.5 lakh DH News Service
