Introduction of GST required a uniform set of laws,
rules and rates on goods and services throughout the
country. There were considerable differences in the VAT
(value-added tax) laws, rules, practices and tax rates
among the states. The Union government had its own
experience in administering indirect taxes since
independence. Each state also had its own set of
politically sensitive industries and desired low tax
rates on items of local importance. In order to forge
consensus, the law committee and the fitment committee
played a very crucial role. Both the committees
consisted of equal number of senior officers from the
state governments and the central government. The
committees worked without a chairperson but had two
co-conveners —one representing the states and the other
the centre. In the absence of a chairperson, there was
free exchange of ideas but the deliberations were
lengthy. The recommendations of these committees were
deliberated upon in the Council for building consensus.
GST being a destination-based tax, many of the
industrialized states were concerned that its
introduction would lead to loss of revenues. There was
also an element of uncertainty about how the new GST
regime would play out. The states wanted an assurance
from the central government that their revenues would be
protected. The centre agreed not only to protect their
revenues but also provide for 14% nominal growth every
year for a period of five years. In case of revenue
shortfall, the states are being compensated through the
compensation cess levied on select demerit and luxury
goods.
As GST was to be levied concurrently by the centre and
the states, it was feared that taxpayers might be
required to have interface with both the central and the
state tax authorities. However, the Council was very
clear right from the beginning that the taxpayer should
have minimal interaction with the tax authorities and
interface, if any, should only be with a single tax
authority. It was decided to divide the taxpayers with
turnover of more than Rs1.5 crore equally between the
centre and the states and to divide taxpayers with
turnover of less than Rs1.5 crore in the ratio of 90:10
between the states and the centre. It was also agreed to
cross-empower tax officers both under central and state
laws.
Implementation of the game-changing economic reform
impinging on a large number of stakeholders required an
agile political body with strong mandate to take quick
decisions. The newly created constitutional body, the
GST Council, has emerged as a unique institution, where
the centre and the states are willing to pool their
sovereignty and give fiscal space to each other. The
Council, since its formation in September 2016, has
worked at a fast pace to take a large number of
tax-related and fiscal decisions. It also realised that
it would not be possible to take urgent operational
matters to the Council and convene full-fledged Council
meetings at a short notice. Therefore, it constituted a
GST implementation committee (GIC), the decisions of
which are implemented with the approval of the Union
finance minister and are later placed before the council
for information. Also, group of ministers and committee
of officers addressed specific issues.
The GST Council has been responsive to the needs and
feedback of the trade, industry and other stakeholders
and made a number of mid-course corrections after the
roll-out of GST. The Council’s structure and working are
being seen as an example to be replicated in other
crucial areas like water resources, road transport etc.
so that the centre and the states could work together in
the true spirit of cooperative federalism and in the
overall interest of the nation.
Source::: Livemint,
dated 05/04/2018.