Yes, We Cleared GST. But Should States Trust The Centre?

With the Lok Sabha passing the GST Constitutional Amendment Bill yesterday, the first hurdle towards introducing the Goods and Services Tax has been cleared. Now the Constitutional Amendment will need to be ratified by half the state assemblies, following which a Bill actually introducing a GST will be placed before parliament. The race to meet the April 1, 2017, deadline is on.

For the Trinamool Congress and for me personally, the passing of the GST amendment was extremely satisfying. Trinamool has long been committed to GST and made positive mention of it in four successive election manifestos: 2009 and 2014 (national elections) and 2011 and 2016 (Bengal assembly elections). 

The Empowered Committee of State Finance Ministers that finally facilitated the GST bill was chaired by my colleague and Bengal's Finance Minister Amit Mitra. I was on the Select Committee that looked into the bill and suggested crucial changes such as in the proposed dispute redressal mechanism between states. These were incorporated in the final bill and it was very fulfilling. 

All this was a learning experience for me. It validated the important and mature role the Rajya Sabha plays in shaping legislation. Those in the ruling party who had dismissed the Rajya Sabha and said the directly-elected House, the Lok Sabha, should get overriding powers cannot deny today that the Rajya Sabha delayed the bill but also produced a better bill. A bill that the Lok Sabha accepted.

Regional parties such as Trinamool have been consistent in backing GST. We have raised principled or technical objections but not political ones. This cannot be said about the BJP and the Congress, which have taken a stand depending on where their MPs sit - in government or in opposition. With well-known lawyers as their spokespersons - and lawyers can argue for any brief or against any brief, at any time - the two major parties kept playing ping-pong with the GST bill.

Let me give you examples. Lok Sabha elections 2009, party manifesto, page 19, point 6: "CST will be abolished and GST would be rationalised between 12 per cent and 14 per cent." This was the BJP's manifesto. Today the party seems to suggest even 18 per cent is too low!

As for the Congress, the former Finance Minister P Chidambaram, described the eventual compromise on GST as "Good Sense Triumphs". But in the Select Committee, Congress members contributed another GST: "Go Slow Tactics". Congress members delayed and delayed, filibustered and filibustered, demanding an 18 per cent GST rate cap be put into the constitutional amendment. They knew this was not acceptable to not just the government but to all of us in the middle - caught between two quarrelsome "national" parties.

Anyway, that is in the past. The GST amendment has now been passed and it will be the BJP-led government's job to implement it. Depending on smoothness of implementation, the government will either be praised or attacked. As my research tells me, after GST was introduced ruling parties in Australia, New Zealand, Russia, Argentina and Indonesia were re-elected. That's the good news. Now the bad news. After GST was implemented, ruling parties in Brazil, the United Kingdom, Germany and South Africa lost elections!

Postscript: The key to the GST grand bargain is the central government's commitment to make good losses suffered by certain states in the medium term. Should states trust the centre? Our experience has been mixed. I need to point out that on the issue of Central Sales Tax (CST), the Central government owes West Bengal Rs 6,500 crore. Odisha is owed Rs 3,000 crore. Punjab, Uttar Pradesh, Assam and Telangana have substantial outstanding CST dues. I hope the GST experience is better.

The fact that the GST Council is designed as a truly federal body, with adequate representation for the states, gives me hope. It will allow state governments a structured role in fiscal and economic decision making. This has been long overdue.

There is also the issue of central cess. The Centre imposes a cess for a particular programme and this suits it because unlike other central taxes, a cess does not have to be shared with states. The BJP government has introduced two new cesses: the Swachh Bharat Abhiyan Cess in 2015 (0.5 per cent), and Krishi Kalyan Cess this year (0.5 per cent).

However, previous cesses have been a waste:  

- Rs 66,117 crore (2002-15) has been collected under the Universal Service Obligation Fund to provide telecom access to distant areas. But 59.2 per cent of this money is unspent

- Rs 5,784 crore (1996-2015) has been collected under the R&D Cess to encourage commercialisation of indigenous technology. But 78.8 per cent is unused

- Rs 3.83 crore (2014-15) has been collected as Feature Film Cess for welfare of poor cine workers. But 54.8 per cent is in the bank, sitting idle

- Rs 53.37 crore (2014-15) has been collected as Tea Cess for development of the tea sector. But 100 per cent remains with the government, with nothing spent
    
In the spirit of cooperative federalism, and marking the inauguration of the GST era, the central government should announce an abolition of this cess culture. It amounts to cheating states of their money - without achieving much for the country. It would be only right if all cesses were to be subsumed under the GST from April 1, 2017.

Derek O'Brien is leader, parliamentary party Trinamool Congress (RS), and Chief National spokesperson of the party.

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