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‘If the Centre does not borrow, the States should get back their right to taxation’

Poornima Joshi New Delhi | Updated on September 02, 2020

TS Singh Deo, Finance Minister, Chhattisgarh

Chhattisgarh Finance Minister TS Singh Deo is among the strategists charting out the future course on GST compensation. In an exclusive interview to BusinessLine, Singh Deo talked about the role of Parliament in diffusing the stand-off between the Centre and the States on the issue and why the Centre should be the one borrowing to compensate the States. Excerpts

Don’t the latest GST estimates support the Centre’s claim that given the shrinkage in the economy because of Covid-19, it is not possible to give 14 per cent to the States?

This is a very limited understanding of the whole issue. Compensation cess is collected by the Government of India and it is deposited in the Compensation Cess Account. It doesn’t go to the Consolidated Fund. All over the States, money is deposited in that account. To begin with, the Centre’s unilateral proposal to not award the State’s share is violative of the Constitutional amendment effected to usher in the GST regime and the provision of the GST Council to have a Compensation Cess. Now, the Centre is obfuscating the matter and asking the States to borrow. Once you do that, you are changing the entire GST regime, by asking the States to surrender their right to taxation under the First and the Second Schedule (of the Constitution) for the Central List and the State List for taxation. The Constitutional amendment with regard to the GST regime translated into the Concurrent list having no taxation provision. The right of the States to tax was transferred to the Centre...to the GST Council. When the right of the States to tax has been subsumed by the GST Council, then why are the States being asked to take a loan for a Cess which is deposited at the level of the Government of India?

Another question is -- why was the matter regarding 14 per cent compensation sent to the Attorney General (AG) for his opinion? Are we, as responsible representatives, not aware that this provision about 14 per cent compensation is binding? But when the Centre directs such queries to the AG, it sends a very negative signal to the States. Now, you’re talking about Act of God and sending a query to the AG about the very basis of GST regime, about a sacrosanct provision.

So what is the way out?

The way out is that the Centre should take the loan and service it from the Compensation Cess. If they are not willing to do that, then a general national regime of taxation should be restored. Give back the States their right to taxation. For instance, I as an individual was not in favour of the States being deprived of their right to taxation. Without an independent economic status, the State has no identity of its own. If there is no right to collect revenue, then what is the State? It is only a hollow paper entity. The consensus was that even the smallest of the States would have an equal say. The GST Council was set up to work with consensus. But if the Centre behaves like the Big Brother, then you are disrupting the entire system just because you have a majority. This is nothing but majoritarianism.Compensation is just one aspect, but the real issue is that of the intent and action of the Centre in maintaining the GST regime as it was meant to be. What the Centre has done now has very far-reaching consequences. If the Centre is going to renege on its Constitutional commitment, then the States should get their right to taxation back. We are very willing and capable of looking after ourselves.

Do you think there is still room for consensus?

There must be consensus. We all want a consensus. We should all talk like responsible representatives. But one thing is clear, when the States have honourably relinquished their right to taxation, the Centre must honour its commitments.

Will we see the issue being raised in the coming Parliament session?

It is an issue to be raised in Parliament. And across party lines, there is a consensus. In the Constitutional Amendment, Article 18 stipulates that Parliament shall, on the recommendation of the GST Council, ensure that the States are compensated for the implementation of the GST regime. So Parliament should be asked to ensure that.

Published on September 02, 2020

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