India Economy

The shared blame of the GST Council

TCA Sharad Raghavan | Updated on January 27, 2018 Published on October 15, 2017

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State finance ministers too have a say in the Council and are accountable for rule changes

One aspect of the current implementation of the Goods and Services Tax that has mostly been left out of the common discourse is the GST Council. There seems to be a lack of understanding about what it is, what its responsibilities are, and its membership.

As a result, a lot of the blame is erroneously placed on those who are not fully deserving of it — namely, Finance Minister Arun Jaitley and his ministry.

The GST Council is the nodal body in charge of drafting the rules and setting the rates for the new indirect tax regime. As such, it has almost completely replaced the Central Board of Excise and Customs, something the tax officers have complained to Prime Minister Narendra Modi about.

Consensus at work

But the important thing to understand about the Council is that it is not a one-man show. The Finance Minister is merely the Chairman of the Council — the members include the finance ministers or designated ministers of each of the other States and union territories with legislatures.

The Council also has a host of technical officials guiding it and explaining the repercussions and legality of the various decisions it takes.

As such, laying the blame for every GST complication or rule change at Jaitley’s feet is only partially appropriate. The structure of the GST Council is such that the Centre has a one-third weightage during a vote, while the States together have a two-thirds weightage. So far, however, not a single issue has come to a vote in the Council, which means that every decision has been taken by consensus.

This is a sensible approach taken by the Finance Minister and the Centre in general. With 17 States and union territories led either by the BJP or its NDA allies, the combined weightage of the Centre and these States would render any vote a one-side affair.

Instead, the Council has met time after time trying to establish a consensus on some very contentious issues. For all the criticism about the government trying to bulldoze the Opposition, it has been remarkably patient with all their objections within the Council.

This works in the Centre’s favour since no member of the Council can later claim that his objections or recommendations were overruled through a vote. That’s the exact point of a consensus — everybody shares the blame equally.

The finance ministers of the States have so far been very lucky to escape the criticism faced by Jaitley. But the fact of the matter remains that the GST Council has changed the rates on more than 100 goods and services and has issued more than 35 clarifications, corrections, and rule changes since GST was rolled out.

And the blame for that — and for the very need for so many revisions — should equally go to the state finance ministers as it does to the Union one.

That said, there is a need for the Council as a whole to be made more accountable. The CBEC could be audited by the Comptroller and Auditor General (CAG) and by the Public Accounts Committee (PAC) and so was answerable to Parliament. The GST Council does not have any such oversight mechanism. It operates in a sphere of close to zero formal accountability.

This is not to say that, as the Union Finance Minister, Arun Jaitley is helpless against the whims of the States. He is a very shrewd politician and a capable speaker. He has the ability and the political heft to quash most objections when they come up for discussion. And, indeed, that might be happening.

But, if that is the case, and the state ministers want to be spared the blame of hasty and ill-informed decisions, then they ought to force a decision to come to a vote. That will make their dissent public. As the situation stands now, there is no reason to believe that they don’t agree with each and every decision taken by the Council. And so, there is no reason to believe why they should be spared the blame.

Published on October 15, 2017

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