Racing against time to get the GST bill cleared from Parliament, Finance Minister Arun Jaitley today attacked the Congress for blocking the legislation that it had itself brought in and said ‘obstructionist’ tendencies and negativism were hurting the country and its economy.
Acknowledging that there may be merit in Congress’ demand for 18 per cent rate of GST, he said the NDA government has “not made any significant modifications” to the bill that the Congress-led UPA government had proposed in 2006-07 Budget, “except to bring a consensus between manufacturing and the consuming states”.
“The state governments belonging to the Congress party have consistently supported the proposal. Is it only out of an obstructionist attitude that the Congress has adopted a negative role?” he asked.
The government needs Parliament to approve the Constitution Amendment Bill in the current monsoon session ending August 13 before half of the 30 states clear it and the new regime is rolled out from April 1, 2016, so that a nationwide Goods and Services Tax (GST) can replace all existing indirect taxes like excise and VAT.
However, Parliament proceedings have been repeatedly getting disrupted over issues like Lalit Modi controversy and the Vyapam scam for the past two weeks.
“Since Parliament is not functioning and there is no way to clarify these points before the same, I am constrained to place the above facts in public domain,” Jaitley wrote in a Facebook post titled ‘Dissent or Disruption â€“ The Congress Partyâ€™s Position on GST’.
He said the Congress and its leader “may be upset with the government for political reasons. They may be upset with the electorate for the 2014 verdict”.
“The Congress party should accept and seriously introspect after having ruled the country for the longest period of time, that negativism hurts the country. Should its obstructionist tendencies inflict an economic injury on the country?” he wrote.
Giving a point-wise rebuttal on the Congress party’s dissent note to the Select Committee’s report on GST, Jaitley said the rationale of the bill is to simplify the complex indirect tax structure in the country.
“The present system involves multiplicity of taxes, absence of uniform rates of taxation, and the cascading effect of ‘Tax on Tax’. It is also an impediment to the seamless transfer of goods and services across the country,” he said.
The GST Constitution Amendment Bill has been cleared by the Lok Sabha and is waiting for nod of the Rajya Sabha, where the ruling NDA does not have a majority.
The report of the Rajya Sabha Select Committee was tabled in Parliament last month. The Committee had suggested to compensate the states fully for five years for any revenue loss for GST rollout. However, the Congress, the AIADMK and the Left had submitted dissent notes on the same.
Jaitley said the proposal for introduction of GST was first mooted by former FM P Chidambaram in his Budget for 2006-07.
“After detailed deliberations and negotiations in the Empowered Committee of State Finance Ministers, the 115th Constitution Amendment Bill, 2011, was introduced by Pranab Mukherjee, the then Finance Minister,” he said, adding that the Bill was referred to the Parliamentary Standing Committee, which submitted its report in August 2013.
The bill, however, lapsed with dissolution of the Fifteenth Lok Sabha. Thereafter, the NDA government again held negotiations with the Empowered Committee and after an overwhelming consensus, introduced a bill incorporating certain changes which had also been recommended by the Parliamentary Standing Committee.
The bill was approved by the Lok Sabha and when it came to the Upper House, it was referred to a Select Committee which has recommended a five-year compensation to the states which suffer any revenue loss on account of introduction of GST, he said.
Arun Jaitley rejected Congress’ dissent notes to the Select Committee report, saying the suggestions being made now were never part of either Mukherjee’s Bill or that of Chidambaram’s proposal.
Jaitley said the Congress’ suggestion of GST rate not exceeding 18 per cent was not part of the bill from Mukherjee.
The FM added: “The rates of taxation are usually not fixed in the Constitution… The rates have to be recommended by the GST Council depending on factors such as economic conditions, revenue buoyancy etc and incorporated in GST laws.
“There may be some rationale in the rate recommended by the Congress party. However, this decision has to be taken by the GST Council and cannot be part of the Constitution itself. The rates will vary depending on a host of factors.”
On Congress’ demand that the expression ‘supply’ should not apply to goods and services supplied by one unit of a firm to another of the same firm, Jaitley said there was no such proposal in either Mukherjee’s bill or in the proposal approved by Chidambaram.
The FM said the Congress’ proposal that the share of local bodies in the revenue should be part of the proposed Constitution amendment, runs contrary to the 73rd Amendment of the Constitution, which provided for setting up State Finance Commissions with a mandate to make such recommendations.
Also, its proposal that a state or a Union Territory with or without a legislature having a population not exceeding 20 lakh should be given a special status was never Mukherjee’s or Chidambaram’s.
“The Congress wants Goa to be a special category state under GST, but Goa has the highest per capita income in the country,” he said.
On the Congress demand that electricity, tobacco products and alcohol for human consumption should be given the same treatment as petroleum in the Amendment bill, he said this was not a proposal mooted by any of the Congress FMs.
Rejecting the Congress suggestion that voting representation of the states in the GST Council to be increased from two-thirds to three-fourths, he said this would reduce the Centre’s voting power from one-third to one-fourth.
“This is contrary to the decision Chidambaram specifically took on April 30, 2013… In fact, the Congress proposal would mean that if all the states get together and decide that the Centre should have a lower GST rate, they could deplete revenues of the Centre almost completely,” he said.
India, Jaitley added, is a Union of States. “Is it the Congress proposal that the Union should cease to economically survive… The Congress appears to have made this proposal without adequate application of mind,” he said.
Jaitley said the power of deciding the modalities of adjudication and settlement of disputes in the present bill is with GST Council.
“Political issues have to be settled politically and not by judges,” he stressed.
The Congress has asked for deletion of a two-year transient provision which provided for an additional tax of 1 per cent to be credited to the exporting state. “This provision has been added in order to allay the fear of manufacturing states which felt that they would initially lose some revenue. This is based on a unanimous decision of the Empowered Committee to which all Congress-ruled states have agreed,” the FM said.