Centre agrees to take decisions on GST only by consensus

To nudge states towards timely implementation of GST, the Centre has agreed that any decision on tax proposals in the new GST regime will be strictly based on a consensus among all states, a climb down from the earlier proposal that gave the Union finance minister the final word in the matter.

In a bid to resolve the tussle over the issue of veto power for the finance minister in the proposed constitutional amendment Bill for Goods and Services Tax (GST), the Centre finally may just retain the ideal “consensus of all States” principle rather than a special power to any member of the GST council that includes the Union finance minister.

In fact, the proposed draft constitutional amendment Bill that irked the states over a special power given to the Union finance minister (veto power) actually was phrased as “as agreed to by the Union finance minister” and the words would find no place in the revised draft, finance ministry sources told FE.

Finance ministry officials had a meeting with empowered committee chairman Asim Dasgupta on Wednesday to discuss various issues regarding the GST. Later finance minister Pranab Mukherjee also met Dasgupta.

Sources said the finance ministry is all set to finalise the decision-making mechanism for the GST regime. Decision can be taken by consensus of all the states means that proposal on rates or structure can be passed only after support of states and the Centre together.

“We will not have the term ?as agreed to by the finance minister? in the draft. We will take a decision on consensus. We have done a lot of work to arrive at this decision. The key word is unanimity and if all states and the Centre agree to a move, that solves the problem,” a senior official said.

Commenting in the new compromise formula, Prashant Deshpande, Leader Indirect Tax Deloitte India said: “Overcoming the opposition by states is very important for meeting the deadline for introduction of GST. The majority decision would represent the voice of the states.” He however added that it was crucial how the majority is defined- a simple majority or a three-fourth majority. According to Deshpande, a three-fourth majority would make sense as it is an ideal majority rule used in many cases.