Why Congress Party is Opposing the GST Bill in its Present Form?

Many people are curious to know why Congress Party is opposing the GST Bill after pushing it for many years. It is natural for the people to think that it is merely to pay back in kind the obstruction of the Bill caused by BJP and its Chief Ministers like Narendra Modi and Shivraj Singh Chouhan when UPA was trying to bring this much needed reform. However, going through their dissent note given to the Rajya Sabha’s Select Committee on the GST Bill makes one realize that the objections being raised by the Congress Party are in the national interest, and not merely to get even with the hypocrisy of BJP.

I have tweeted the eight reasons cited by the Congress Party in its Dissent Note. Let me collate those tweets, with minor elaborations where necessary, in this post:

Reason 1: Congress wants the ceiling on highest rate at 18% instead of 27%. Would you prefer paying 27% tax?

In fact, the highest rate will not be 27% but could go up to 30% under the present proposals.

Reason 2: Congress finds additional 1% tax by manufacturing states as market distorting. Even more so, since there is a provision for 100% compensation.

The whole purpose of the GST is to unify entire India as a single tax regime. Therefore, introducing any special taxes to cater to the greed of certain states is not in the spirit of a GST.

Reason 3: The term supply/ies is not defined. It will make even intra company transfers taxable!

This will cause levying of tax even on transfer of raw materials and semi-finished goods between different branches of a company, situated in different states. Is it not obvious that such a situation is not in the interest of what is proposed by the GST system?

Reason 4: Present GST is diluted by excluding tobacco products, alcohol & electricity from its purview!

These excluded items for a substantial portion of the tax collections. If a substantial portion of taxes are left out of the GST, what is the use of introducing the same?

Reason 5: Proposed GST council is unduly weighed in favour of the Union Govt. Goes against federalism.

Since, disputes between the Centre and one or more states are likely to arise in matters relating to collection and/or sharing of GST, the federal systems requires no single party holds undue influence in the GST council. Therefore, it is only reasonable for demanding a GST Council which consists of more members representing the states.

Reason 6: There is no independent dispute settling mechanism. GST Council consists of parties to dispute.

As stated under reason 5, disputes are likely to arise between states and/ or between state and centre. It is necessary to have independent dispute settlement mechanism to ensure integrity of the country. Instead of an independent mechanism, current form of GST Bill entrusts the task to the same GST Council, which consists of the representatives of the disputing parties. Read this with the Reason 5 which talks about undue weightage for the Union Government in appointment of the GST Council and we get a clear picture of the danger.

Reason 7: There is no provision to protect the share of local self-Govt bodies in the taxes collected

The Constitution of India has guaranteed certain share in the revenues to our local self-government bodies like Panchayats and Municipalities.  The present Bill does not have provisions to protect such shares. It is necessary to incorporate clear provisions so that our scheme of political decentralization does not suffer.

Reason 8: Failure of the RS Select Committee to include detailed rationale for various amendments moved.

Finally, the Congress party is objecting to the refusal of Rajya Sabha Select Committee to include the detailed reasons given by the party for seeking each amendment. Non-inclusion of such reasons will prevent the Parliament members and the public from knowing the rationale behind each proposal for amendment.

                To my mind, these are valid objections from the opposition, which require to be addressed by the Government. If the Select Committee refused to even include the rationale for seeking amendments, one can only speculate what the Loksabha where the Govt is in clear majority will do with those objections!

Source: For the full text of the Dissent Note, you may refer this article, on Scroll.in