Gopinath Sarangi : Is the proposed GST Council against federalism?
Good and Service Tax Council
The Constitution (One Hundred and Fifteenth Amendment) Bill, 2011 has been introduced in Parliament and the same is before the Parliamentary Committee. The said amendment, inter alia, in the proposed Article 279A stipulates for the setting up of the Goods and Service Tax Council. Clauses (1, (2) and (3)) of the said Article are as below:
“(1) The President shall within sixty days from the date of commencement of the Constitution (One Hundred and Fifteenth Amendment) Act, 2011, by order constitutes a Council to be called the Goods and Service Tax Council.
(2) The Goods and Services Tax Council shall consist of the following, members, namely :—
(a) the Union Finance Minister Chairperson;
(b) the Union Minister of State in charge of Revenue ... Member;
(c) The Minister in charge of Finance or Taxation or any other Minister nominated by each state Government Members.
(3) The Members of the Goods and Services Tax Council referred to in sub-clause (c) of clause (2) shall, as soon as may be, choose one amongst themselves to be the Vice-Chairperson of the Council for such period as they may decide.”
The framer of the Constitution had envisaged a federal set-up with check and balance. The members of the Constituent Assembly had detailed deliberation and Continued from page 1
provisions have been made to preserve and nurture the independence of each in the Federal Set up. This is sacrosanct and has to be respected. From time to time the Supreme Court had interpreted the provisions of the Constitution and reiterated the theories of check and balance.
The power to tax by Centre and States has been spelt out in the Entries made in Lists inserted to Seventh Schedule.
However, the economic compulsion for reform is paramount. Taxation on same goods and services by the Centre and States has created imbalance, distortion, retardation of economic growth and problem in tax administration and collection. It has ushered in tax evasion. Tax compliance is tardy. There is no free flow of goods and services due to tax barriers. The cost of final product is high and not competitive in international market inasmuch as there is no flow of tax credit till the final point of consumption. For these reasons, the Government of States and Centre had detailed deliberations and appointed a Committee of Group of Ministers under Chairmanship of Ashim Dasgupta. The Group has recommended for CGST and SGST on all goods and services. The Finance Commission had examined the levy of GST and had concurred with the basic recommendations of the GOM. The proposed amendment to the Constitution is the first step in that direction.
The vital issue is the composition of the Council as stipulated in clause (2) of the proposed Article 279A. Is it independent of Ministry of Finance or is simple an extension of it? Will the Council guarantee the power of States or would stampede on it? Will it be in a position to take a decision in the economic interest of the country? Will it ensure independence for States in their economic policy in a plural society having imbalance growth, vastly underprivileged rural population and divergent economic needs, local and regional compulsions etc.? The philosophy of governance by a State may differ from that of another State or with the policy of Centre. The economic necessity is different than the political philosophy. These may not converge in many situations and circumstances. The list is endless.
It is, therefore, necessary to have a Council independent of political compulsion so that decision on GST is taken on economic need, the compelling force to usher in GST. The composition of the proposed Council should be as follows:
1. Chairperson should be a person who has expertise in ECONOMICS with specialization in indirect taxation and recruited by a Committee of three Judges of Supreme Court by inviting application from suitable persons willing to shoulder responsibility for tenure of FIVE YEARS without re-appointment and followed by personal interview. The name of the selected person shall be sent to President of India to issue appointment order.
2. The members from each states shall be recommended by the Chief Ministers of the states having Legislative Power. The members shall have expertise in indirect tax besides being an economist/social activist/academician of national repute by following the procedure of open recruitment and interview by three Judges of concerned High Court. The tenure shall be for FOUR YEARS and can be re-appointed for another term of FOUR YEARS if the Chief Ministers so desire.
3. The Vice-chairperson shall be elected members for a term of 2 yrs.
Unless such procedure is followed, the economic decision to usher rapid economic growth through the instrument of GST will not be effective. There will be resentment amongst the States or even States and Centre which may create problems for both Centre and States. It is not too late as the Bill is with the House Committee which can suggest amendment in the interest of economic development of the country. The trade is eagerly waiting for GST if it is in its true spirit and perspective.