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But ask anyone from
industry or the tax experts advising the finance
ministry on implementing GST, you are likely to get a
slightly different answer. According to some of them at
least, the finance minister may be responsible to
Parliament to fulfil his promise on GST, but he has
virtually no real control over the timetable for
implementing the new taxation system.
Indeed, Mukherjee has been qualifying all his responses
to GST with the statement that places the burden of
delivering the new “fiscal baby” on the chairman of the
empowered committee, Asim Dasgupta, who is also the
finance minister of West Bengal. In other words, if
Dasgupta fails to forge a political consensus among all
the states on GST — and there are a couple of states
that continue to toe a tough and intransigent line on
the new taxation regime, Mukherjee may well take the
convenient route of postponing the date of implementing
GST beyond April next year.
Complicating the GST road map further are Dasgupta’s
political worries. The equations between the central
government and the Buddhadeb Bhattacharjee government in
West Bengal are no longer as cosy as they used to be,
thanks largely to the strained relationship between the
Communist Party of India-Marxist and the United
Progressive Alliance government at the Centre. Dasgupta
also has to worry about his own party’s electoral
fortunes that would be put to test in about a year and a
half from now.
To pin all one’s hopes on Dasgupta to deliver the new
fiscal baby may not therefore be a sign of either
pragmatism or prudence. Politically also, the prospects
of GST may become a little dim, if the window of
opportunity offered till the end of 2010 (there are no
assembly elections till then) is not used to push such
fiscal reforms through by April 2010. Yes, the GST
system can start even in the middle of a fiscal year,
but there will be complications that may only harden the
stance of those who are opposed to it.
Within the finance ministry, only a few officials have
the experience and the necessary domain knowledge for
putting in place as complex a taxation system as GST.
Tax experts privately admit that the last finance
ministry man who knew GST was Parthasarathi Shome,
advisor to Palaniappan Chidambaram, when he was the
finance minister. Revenue Secretary PV Bhide is a career
bureaucrat and not a taxation expert. Apart from him,
only a few senior officers in the revenue department
have the requisite knowledge of GST.
If an expert committee has recommended that the
revenue-neutral rate for GST could be closer to 11-12
per cent, there is no meaningful debate on the number.
Instead, bureaucrats are busy debunking that number
though it is based on a survey. Yet, if the
revenue-neutral tax rate for GST is 11-12 per cent, it
could be a winner right from the start as governments
could then package GST as a measure that effectively
brings down the incidence of indirect taxation, although
the new system would mean a wider coverage of new areas
under the tax net. If one takes into account the Finance
Commission’s assurance that all revenue losses to be
suffered by the states on account of GST would be
compensated by the Centre for the next five years, there
is no reason why the new GST rate should not be
somewhere between 11 and 15 per cent, according to tax
experts.
This could also be a good argument for enforcing a
single-rate GST, a proposal that has been given a quiet
burial on the ground that governments should retain the
discretion of placing some items under a low band of tax
rates and subjecting other items to a higher duty. It is
not often realised that a single-rate GST, with no
exemptions, will have such a far-reaching beneficial
impact on the economy and its efficiency that the
apparent advantages of two rates of GST would be more
than neutralised. In any case, the spirit of GST is to
eliminate discretion at all levels.
In contrast, countries that have benefited from
switching over to GST (notable among them are New
Zealand and Canada), managed the transition largely
because they had a political leadership, which gave
unequivocal support to the new taxation system and put
in place a large autonomous body in charge of planning
and implementing it over a stipulated time frame. In
India, neither the committee nor the finance ministry
has any team in place to plan and manage the transition.
China, which has just begun talks on moving over to GST,
is already busy putting in place a strong team of
experts and technocrats.
Is it then time to entrust the final responsibility of
GST to an empowered team of tax experts and
professionals? Or should the 13th Finance Commission be
the appropriate body for that?
Source :
Business Standard,
dated
10/11/2009
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