Sushil Modi is the second finance minister who has had to move out as chairman of the GST empowered committee. The first was Asim Dasgupta,who went out in May 2011 when the Left Front were knocked out in West Bengal. Modi replaced him as the chairman.
Then too the misgivings in the industry were whether any body else would have the combination of knowledge of the sector with the pragmatism required to guide 28 states and seven union territories into a national GST. That actually was an after thought. A key reason why both were selected was they were from an Opposition-ruled state which helped the Centre to steer the tax reform.
The reason for GST having missed three deadlines for its implementation then is elsewhere and those are chiefly because the Centre was not really pushing hard enough in the past few years. A positive development is that the constitutional amendment bill to give states the power to tax services and the Centre the power to tax goods at the retail level has reached Parliament and amendments agreed to by states are also ready.
If the JD(U) decides to give finance minister P Chidambaram support in the two house then it is possible that the bill could be passed soon which will bring the GST time table nearer. Where Modis absence will be felt is in working out the compensation package the key hurdle where GST has tripped of late. But here too it is more about how persuasive the Centre can be with the states. The arrears for 2010-11 and some for 2011-12 are set to be released by the finance ministry in this fiscal. No state wants to give up the right to tax alcohol and of late special category states have come up with the right to let their clutch of tax exemptions continue apace. Assam for instance wants taxation of natural gas to remain out of GST
India biggest tax reform is at present,stuck in three corners. There is a demand for too many exemptions; this in turn makes the floor rates of tax high and almost as bad as the current state of affairs and finally the states have not put in the interlocking architecture of information technology and trained manpower necessary to run the system. Modi quitting as the chief of the GST panel is not one of these.
Subhomoy is a Deputy Editor based in New Delhi.