Fresh from the Rajya Sabha clearing the 122nd Constitution Amendment Bill to usher in the Goods and Services Tax regime (GST), Finance Minister T.M. Thomas Isaac has voiced his concern over the Central government bid to deprive States of their due from the divisible tax pool.
In a letter to Union Finance Minister Arun Jaitley on Wednesday, Dr. Isaac pointed out that the Bill had clearly departed from the consensus arrived at the Empowered Committee of State Finance Ministers on key issues. This deviation would prove detrimental to the interests of the States.
Citing an amendment to Clause 10 of the Bill which seeks to establish a new framework for distribution of Central taxes, Dr. Isaac said it goes against the basic design that all taxes collected by the Union government in any given year should form part of the divisible pool and should be apportioned among States. This has now been seriously compromised with, he said.
Almost all States, including Kerala, had come out in support of the GST hoping that the new tax system would boost their revenue and put more resources at their command. This hope was founded on the thinking that all taxes would form part of the divisible pool and thus the States would also get their due. But as per the Bill approved by the Rajya Sabha, sharing of revenue has been confined to certain areas only and hence it would not be as advantageous to the States as projected earlier.
Amended proposal
The amended proposal had not figured in the discussions at the meeting of the empowered committee too. The empowered committee had reached a consensus on a large number of key issues pertaining to the GST Bill.
