Consensus eludes introduction of the Goods and Services Tax even under the National Democratic Alliance government after the proposal divided States ruled by the Congress and others during the United Progressive Alliance regime.
Madhya Pradesh Chief Minister Shivraj Singh Chouhan raised fresh concerns in a letter to Finance Minister Arun Jaitley in July, saying the Bill had marked a major departure from the division of tax powers between the Centre and the States envisaged in the Constitution and could cause substantial revenue losses to the latter and impinge on their fiscal autonomy.
“The authors of the Constitution had consciously provided mutually exclusive taxation powers to the Union and the States to avoid conflicting or competing taxing powers. Concurrent powers under the proposed scheme [are] a major departure from the original scheme which should be avoided, if possible,” Mr. Chouhan wrote in the letter, a copy of which is with The Hindu .
Pointing to the Centre’s difficulties in managing its fiscal deficit, Mr. Chouhan said the States hence had doubts about timely compensation for losses incurred during GST implementation.
“States are likely to lose substantial revenues in the new regime … [and their] experience in receiving compensation for Central sales tax loss in the past was not very satisfactory. The Union government continues to have difficulty managing its fiscal deficit,” he said.
While acknowledging the revised GST draft (2014) had significant improvements over the 2011 version introduced by the UPA, Mr. Chouhan drew attention to the unfulfilled “promise” made by the previous NDA government on allowing states to collect service tax.
In the letter — a copy of which is with The Hindu — the M.P. chief minister writes,
“unfortunately, article 268A has not been operationalized in the last 10 years… kindly operationalize the Constitution (88th amendment) Act and fulfil the promise made during the previous NDA regime till we have the required IT infrastructure to effectively deal with the complexities…in the proposed GST regime,” he wrote.
Mr. Chouhan also said he hoped the proposed GST council would be a recommendatory body and its provisions (contained in Article 279A) would be guiding principles akin to the Directive Principles of State Policy and “not take away the legislative autonomy” of states.
While pledging Madhya Pradesh’s full support to “integrating the domestic market for goods and services”, he said the new regime could increase tax incidence on small businesses and result in dual tax administration of small businesses “which can be quite unpopular”.
He urged Mr. Jaitley to “seriously consider the concerns of the states as promised by the hon’ble Prime Minister”.
