Jaitley, who needs Parliament approval for the Goods & Services Tax (GST) Bill in the winter session beginning Thursday to rollout the new indirect tax regime from planned April 1, said he is willing to discuss with Congress as some of its suggestions were not in the larger interest of the GST structure.
“We are reaching out to them, we are willing to discuss with them because some of these suggestions may not necessarily be in the larger interest of the GST structure,” he said at an Assocham event here.
Jaitley said those stalling reforms should realise that space for obsolete thinking is now shrinking and those who support reforms is much bigger than those who obstruct. “The wisdom which dawned on my friends in the Congress party had not dawned on them when Pranab Mukherjee (as Finance Minister) introduced the GST (in 2011).
“It did not dawn on them when (the then Finance Minister) P Chidambaram accepted the Standing Committee recommendations but to come out with the preposterous suggestion that tariff must be mentioned in the Constitution document so that in a given exigency if tariff has to be altered you need a two-third majority in both houses of Parliament and has to go to each of the states,” he said.
Jaitley said it would be “extremely unfair” to the country “if we try to impose in the name of political compromise, a GST with a defective architecture”. “And when tariff rate has to be mentioned in the Constitution itself, (then it) is a flawed architecture… Because the GST with flawed architecture can actually damage the system much more than it can benefit,” he said.
The Congress had stalled passage of the GST Bill in the last session of Parliament over its demand that a revenue-neutral rate not higher than 18 per cent be mentioned in the Constitution Amendment bill.
GST, which will subsume more than a dozen state levies to create a single market, is to be implemented from April 1, 2016. But a Constitution Amendment Bill could not go through the Rajya Sabha in the last session of Parliament due to opposition from the Congress. The April 1 deadline may be missed if Parliament does not pass the Bill in the session from November 26 to December 23.
Once the Bill is passed, more than half of the states have to ratify it before Parliament passes another enabling bill to implement GST. The Congress is opposed to states being given powers to levy additional 1 per cent tax on supply of goods over and above GST rate. It also wanted tobacco and petroleum products included within the GST ambit.
“And once we are going in for such reforms, this reform takes place once in decades. And I would expect, the party which has been for over half a century has been a ruling party to seriously reconsider some of these suggestions,” Jaitley said. Stating that mentioning tariff rate in Constitution itself is a “flawed architecture,” he said this wasn’t there in Pranab Mukherjee’s as well as Chidambaram’s bill.
“And therefore the effort of any government is to charge tax at a rate which is a bare minimum amount required,” he said also finding fault with the dispute resolution mechanism suggested by the Congress.
Congress wants a clear dispute resolution mechanism to resolve disagreements between the states and the centre as also 100 per cent compensation to states for revenue loss for all five years.
“Two suggestions have emerged. The first is make the Centre one-fourth (in the dispute resolution body) And if Centre becomes one-fourth, states become three-fourth (and they) can decide on India’s taxation policy. So, India as a union of state ceases to exist,” Jaitley said. Stating that the party must ponder before raising such suggestions, he said, “The government of India by accepting such suggestions in a flawed structure cannot become a stranger to India’s taxation policy.”
The Finance Minister said another suggestion is to create a forum where judges will decide. While there is separation of powers between the executive and the judiciary, some dilution has alredy taken place with large part of legislative and executive power going away. “Taxation is one of the very few powers that Parliament has. That in the world’s biggest democracy the power of taxation must also go to court.
“The party having ruled India for almost over fifty years, to make a suggestion of this kind, I think they will probably have to revisit some of these suggestions. I have no difficulty in discussing these with them but the suggestions must never lead to a GST with a flawed architecture,” he said.