‘GST has two fathers and two mothers, nobody knows who is in charge’     

Satya Poddar, a tax partner in the Policy Advisory Group in Ernst & Young, has spearheaded tax reforms and designed the Goods and Services Tax in several countries including China, Russia, New Zealand, Canada and now India. A part of the task force of the Thirteenth Finance Commission on GST, Poddar has also assisted several state governments including those of Orissa, Andhra Pradesh, Karnataka, Madhya Pradesh and Uttar Pradesh in implementing VAT. In an interview with Shruti Srivastava, Poddar spoke about a wide range of taxation issues.

Excerpts:

What has been your experience working in India as compared to other countries?

I thought it would be quite a challenge for all the states to come together for such an Act. But it’s truly an outstanding achievement; to do a joint act is quite a challenge politically. But they have done it. Even to this date, I don’t think that this kind of consensus and such high degree of cooperation among states I have seen anywhere. But what is lacking at the moment is a focused effort to develop infrastructure for GST. And in some way, in my view, it (the GST) has become an orphan. It has two mothers and two fathers and nobody knows who has the charge. The states think the centre is doing, the centre thinks the states are doing, nobody does it in the end and not only that, when somebody does it, the other party starts saying why did you do this?

But the cabinet recently approved a computerisation project worth Rs 1,133 crore for implementing GST...

You do it but it’s a piecemeal approach. What computerisation? Computerisation by itself can not function. You need to have a supporting element. Start with the tax design. Even now they are debating how much should be the tax base and rate... if you had a secretariat dedicated for this, then you come to a common view. There is no debate or fight among the governments about what the rate should be. Should it be 10 or 12 per cent? It is the function of the secretariat. Don’t expect the ministers to decide what should be the rate. Basically, it is the bureaucracy that has failed.

But even if we have a secretariat, how many states do you think would be ready to budge and give even an inch of their fiscal autonomy? How would you reach a consensus?

Most people think they would lose something. By keeping petroleum in GST, they don’t lose anything. Rather it’s the economy that gains. You can still continue to levy duty on alcohol, above the GST rate. It’s not a question of how many things should be included, it’s a question of giving full input tax credit and making the tax structure simple.

They (the states) have to give up nothing but unfortunately there has been no debate on this. You don’t have to give up anything but design a better GST structure.

What do you think about the progress made so far in India as compared to that in other countries?

There are three dimensions to it. Political willingness to take on these issues is absolutely amazing. I have not seen any country where political parties of so many different types and colours would come together for such a thing. The second is thought leadership. In most of the country people don’t have the same quality of thought leadership in conceving and designing such a tax structure. The credit goes to people like Kelkar, the PM and Chidambaram, who have the vision to see the impact this would have on the economy. But there is a resistance at the bureaucratic level but that’s everywhere. The third thing, which is a negative, is that the process of planning and preparation is absolutely pathetic. Countries far less advanced do a much better job of planning than India.

Are the states actually working on the contentious issues?

Nobody comes prepared, finance secretaries and commissioners don’t have time from their regular duties, how do you expect them to come prepared for GST? You have things falling between stones. Nobody is planning properly... there is no country where I have worked, where the clamour for GST is higher. I have heard no voice of dissent, which is amazing.

Even the private sector understands that they will gain from GST, unlike any other country. In Canada, we told the FM that you will lose your seat, so only touch it (the GST) if you are ready to sacrifice your power. But, in India, it is amazing.

Source: Indian Express, India, dated 24/02/2010