P Chidambaram in his weekly column in the Sunday Express (IE, September 14), has cited excerpts from his speech in the Rajya Sabha in July 2016 on the Goods and Services Tax Bill to demonstrate that the recent decisions of the GST Council that are being hailed loudly by the Prime Minister and his supporters as their achievements are only corrections of errors in the original Bill that the Congress as opposition had pointed out when it was brought to Parliament a decade ago, and referred for detailed consideration to a Select Committee of the Rajya Sabha. The three Congress members nominated by the party to the select committee were Madhusudan Mistry, Bhalchandra Mungekar and me. We were mentored, guided and generally supervised by the Congress financial expert Chidambaram.
Nearly a year before Chidambaram’s, we three had submitted a Note of Dissent attached to the main report of the select committee. I believe IE readers need to be acquainted (or re-acquainted) with the dissent note to understand how much the country and our business community, especially small businesses and small traders, have suffered in consequence of the BJP government having shut its ears to our sound advice only because they wanted to get entire credit for enacting GST, which was in fact a bold and revolutionary initiative of the Congress-led UPA II government. Now that good sense has at last dawned on the GST council, the least the government could do would be to acknowledge that they were wrong in forcing the three of us to resort to a Note of Dissent instead of incorporating our views in the main body of the Select Committee report. But such large-heartedness does not characterise those ruling us at present.
Therefore, to restore credit where credit is due, I reproduce without further comment key extracts from the main dissent note (but, for want of space, not its technical annexes):
“We are in favour of a Goods and Services Tax that is simple and comprehensive. The Constitution (122nd) Amendment Bill, 2015, is neither. It is pitted with compromises, exclusions and exceptions that make it impossible for us to extend our support to the Bill in the absence of the amendments we have proposed being incorporated in the Bill, as drafted at present.
First, to ensure that GST rates are moderate and reasonable and do not impose an unfair burden on consumers, particularly poor consumers, it is necessary that a ceiling rate be specified in Article 246A so that, in the pursuit of higher revenues, the GST Council desists from crossing the ceiling. We have proposed a ceiling of 18 per cent as a reasonable, moderate, adequately revenue-generating GST rate.
Second, we find the proposal to levy an additional 1 per cent tax to be market distorting, especially in view of the fact that we have proposed 100 per cent compensation for a minimum of five years to States that might lose revenues. Further, in our view, the compensation should be deposited in a GST Compensation Fund, under the administrative control of the GST Council, as proposed by the Standing Committee on Finance.
Third, the single most crucial word in the Bill is “supply links”, which is used in clause 9 and clause 18 without being defined. We have, therefore, sought to amend clause 9 through two provisos to article 269 (A) to clarify that goods moving from one unit to another unit of a firm in different States under the same ownership, or when two or more firms are collaborating in units located in different States for the manufacture of the same end-product, should be excluded from the term “supply Iinks”. This would also apply to the same term used in clause 18. However, representatives of the Government have failed to define this term in the Committee on the ground that three governmental committees are engaged in defining the term in preparing Bills for GST, SGST and IGST. We believe that a Select Committee of the Rajya Sabha cannot be subordinated to bureaucratic committees and that it would not be proper for the Select Committee to commend a draft Constitution amendment to Parliament without a proper agreed definition of this key term.
Fourth, given that the fundamental aim of GST is to establish a common market for the whole country, we are unable to support a GST Bill that excludes indefinitely from the purview of the GST tobacco and tobacco products, alcohol for human consumption and electricity supply and consumption. We propose that all three be included in clause 12 of the Constitution amendment bill, with the condition that the GST Council take a decision for their inclusion in GST within a period of five years.
Fifth, we cannot support a GST Council that is unduly weighted in favour of the Centre. In the interests of true “cooperative federalism”, the share of the States in voting in the GST Council must be enhanced to 75 per cent and the share of the Centre brought down to 25 per cent.
Sixth, we cannot support a Bill that transgresses the elementary principle of law that parties to a dispute cannot be judges in their own cause. The failure to incorporate a GST Disputes Settlement Authority, as was provided for in the 2011 Bill, is a serious lacuna that must be filled. The GST Council, comprising members who will necessarily be party to any dispute relating to the implementation of GST, must be supplemented and reinforced with a GST Disputes Settlement Authority in toto as provided for in the 2011 Bill.
Seventh, the sources of revenue of the Panchayats and Municipalities, as provided for in Parts IX and IXA of the Constitution, must be safeguarded and they must be assured of their due share in the revenue buoyancy that is expected to arise from the enactment and implementation of the GST. It is only with such assurance, through the amendments we have suggested in this regard to the Bill, that we might find it possible to support the proposed legislation. (The 15th Finance Commission under N.K. Singh has since supported this proposal)”
The writer is a former Union minister
