The BJP’s call

The UPA government needs to move on the Goods and Services Tax (GST) in the coming budget. This has long been delayed because of the slow progress needed to arrive at a consensus. The fact that India has a federal structure should be its strength and not its weakness as has become in the case of GST,over which discussions in the empowered committee have been continuing for many years now. Today,there are few champions of GST and the Centre must fill this gap by taking the leadership. At the same time,it is important for the opposition to play a constructive role. The idea of the GST was mooted under the BJP-led NDA government. The BJP,as the largest party in opposition and one that has governments in so many states,needs to break out of the all-round negativity that locked down the winter session.

Today,when reforms have almost come to a halt,the GST will be a big step forward. The reform is part of the overall objective to build a modern tax system in which individuals and firms should have to pay only three taxes: property tax,income tax and GST. The record-keeping,tax form filling and corruption associated with the multiplicity of levies would thereby be eliminated. In particular,a key benefit will be that of building India as a common market,where goods and services move freely across state boundaries. Finally,the GST will make possible the full elimination of customs duties. These are all features that will raise productivity,reduce distortions and increase the rate of GDP growth.

The first step the finance ministry needs to take is the launch of a “Central GST”,which combines the CENVAT and the Central Service Tax into a single IT system on the lines of the Tax Information Network (TIN) which has worked very well for income tax. This new IT system would be a model for a countrywide GST. While difficulties can be expected with many state administrations trying to fight for turf in the collection of GST,the Central government must take the lead and push for an efficient administration. Each business should have to deal with a single administration and a single IT front end for GST,rather than many tax administrations and many forms. The Centre must create a roadmap for this. Even if the BJP continues to play spoilsport,the Centre can move ahead on a common market for states willing to join. It would test the reformist credentials of other state governments,the BJP’s included.