Economy

States’ right to legislate has been reiterated, says Chhattisgarh FM

Poornima Joshi | Updated on: May 19, 2022
TS Singh Deo, Chhattisgarh Finance Minister

TS Singh Deo, Chhattisgarh Finance Minister | Photo Credit: Sambhavi Vaideeswaran@Chennai

TS Singh Deo says the SC judgment empowers States which have been at the receiving end of prevalent majoritarianism in GST Council

After the Supreme Court underscored the constitutionality of the federal principles under articles 246A and 279A that ensure equality between the Centre and the States, the fate of “one nation one tax” or GST, hangs in balance especially as the Opposition-ruled States have asserted that they have the right to legislate on indirect taxes. In an interview with BusinessLine, Chhattisgarh Finance Minister TS Singh Deo welcomed the judgment and maintained that producing States should have the right to decide on the tax rates. Excerpts:

The Centre says that the legal position underlined by the Supreme Court is not new and it would not alter the way the GST Council has been functioning. Your take?

First of all, I must express my relief and welcome the SC judgment which has upheld the Constitutional principles of federal principles. This is important in the light of majoritarianism that has been prevailing in the recent months and years in the GST Council. This is different from the consensual approach adopted in the initial years when the late Arun Jaitley gave due weightage to individual views.

If even one State, no matter how tiny or which party they belonged to, had a dissenting view, he would give considerable thought and devote time to thrash the issue out with the concerned Finance Minister. There was an openness to a differing opinion. But now the situation is that decisions are taken in advance and pushed through the GST Council. There is a clear difference between then and now.

I will give an example – the one important point of consensus in the Council was the concept of 14 per cent protected annualised revenue to the States. But the double digit growth that was envisaged when this protected revenue was decided never happened. And then around the time of the Covid-19 pandemic, when growth plummeted to 2 per cent, where did the 14 per cent protected revenue go? That was never given.

Not only that, there was a tussle over who would take the loan. The Centre insisted that they would be the medium through which the loans would be routed. The situation with regard to borrowing options for compensate of revenue shortfall was resolved much later, sensible so. These issues visibly underline the kind of majoritarianism that prevails in the GST Council.

How does that position get altered by the SC judgment?

The SC is saying that the States have a right to legislate on indirect taxes. States like Chhattisgarh, a producing State, is not compensated adequately for our resources. We remained under-developed. That was the reason for creation of Chhattisgarh in the first place, so as to facilitate the State to harvest its resources for the good of our people.

On coal, there was VAT/cess at 5 per cent. That is converted into 5 per cent GST. Chhattisgarh gets 2.5 per cent SGST and under the Finance Commission devolution, we are getting back 41-42 per cent. In effect, the State is left with 71 per cent of the revenue. The rational of the State’s natural resources aiding in its development is defeated. There are other items that we produce on which we do not get compensated.

These are products like iron, steel and cement that do not get consumed in the State and we do not get any SGST, we would get 41 per cent of IGST. I am okay with tax rates although we have too many rate slaps but the right of taxation must lie with the State. The States which are losing revenue should have the right to legislate.

Do you believe that the State’s legislative power has been strengthened by this judgment?

Oh, absolutely. I have always held that the GST should be from the point of production, not from the point of consumption. It is from the point of consumption. Then why should Chhattisgarh make its land, infrastructure, manpower available for an industry from which we cannot generate revenue? This regime does not benefit lesser developed States which are rich in mineral resources. This judgment reiterates the right of States like us to legislate on taxation.

Published on May 19, 2022
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