Finance Commission Task Force Report on GST - The Enemy within!

TIOL - COB(WEB - !""

#ECE$BER !%& '(()
By Shai*en+ra ,-mar& E+itor
I$$E#I.TEL/ a0ter the re*ease o0 the 1First o0 the #isc-ssion 2aper on GST1 3y the
Empowere+ Committee o0 State Finance $inisters(EC on 4o5em3er !(& '(()& TIOL
ha+ commente+ in 6reat +etai*s (see o-r piece 1GST ro**-o-t7 State 0isca* 8in6oists s-ccee+
in pro5in6 .pri* ! st as 1.** Foo*1s #ay1 a3o-t the -nrea*istic 0acets 3ein6 attache+ to the
new ta9 re6ime: Whi*e speakin6 to me+ia persons the EC1s Chairman& $r .sim
#as6-pta& ha+ stren-o-s*y ta*ke+ a3o-t three prominent +ea+*ines&not on*y 0or the EC 3-t
a*so 0or the Centre - 4o5em3er !;th 0or 0ina*isin6 the te9t o0 the Constit-tiona*
.men+ment< 4o5em3er =(th 0or po*ishin6 the phrasin6 o0 the $o+e* Le6is*ations< an+
>an-ary !;th 0or p-ttin6 the IT In0rastr-ct-re in p*ace:
.*tho-6h $r #as6-pta ha+ e9hi3ite+ a 3ra5e 0ace in 0i9in6 these +ea+*ines& 3-t 0or TIOL&
which co-*+ see the e*ements o0 s-rrea*ism in his c*aims& it was a** -nrea*: In other wor+s&
the +ea+*ine o0 .pri* ! st& '(!( tr-*y appeare+ to 3e a 1.** Foo*1s #ay1: 4ow a0ter a month
o0 this e5ent& when TIOL *ooks 3ack an+ takes another *ook at the entire 6am-t o0
+e5e*opments& the chances o0 rea*isin6 a** the +ea+*ines 0i9e+ 3y the EC ha5e mo5e+ into
the rea*m o0 mis*ea+in6 0antasy! 4othin6 has 3een hear+ a3o-t either the te9t o0 the
Constit-tiona* .men+ment or the $o+e* Le6is*ations 0or the CGST& SGST an+ IGST:
$ore shockin6 is the recent news that e5en 3e0ore the EC an+ the Centre co-*+ a6ree on
the 3asic str-ct-re o0 the new 0isca* e+i0ice& the EC wo-*+ 3e comin6 o-t with its own set
o0 m-*tip*e GST rates: #e0yin6 a** *o6ic an+ the spirit o0 cooperation& the EC appears to
3e in a tearin6 h-rry to ro** o-t e5erythin6 that pro5i+es a *e6 to its 1-ni*atera* 0antasy1&
an+ pro3a3*y 3*ame the ?nion Go5ernment 0or the 0ai*-re to make it happen as per the
+ea+*ines:
@ere comes yet another 3o-t o0 shock 0or a** GST-optimists: E5en 3e0ore a 0orma*
anno-ncement is ma+e 0or postponement o0 the .pri* ! st +ea+*ine& the Finance
Commission Task Force has 6one 3eyon+ its man+ate an+ p-she+ the +ea+*ine to Octo3er
!& '(!(: @as it 3ecome a pro9y 0ace 0or the CentreA Wi** the Finance $inister c*ari0y this
pointA Or&is it that the the Empowere+ Committee which has 3een man+ate+ to work in
c*ose tan+em with the Centre to thrash o-t the nitty 6ritty o0 the new re6ime& has in t-rn
+e*e6ate+ its powers to the Finance Commission Task Force: Let1s 0in+ o-t what man+ate
was 6i5en to the Task Force: Goin6 3y the report o0 the Task Force which has not
0o**owe+ the protoco* o0 6i5in6 the Terms o0 Re0erence in the 3e6innin6 o0 the Report (a
typica* characteristic o0 its Chairman& $r .r3in+ $o+i& who has 6i5en 1#e0initions1 o0
wor+s an+ phrases -se+ in the #irect Ta9es Co+e Bi**& '(()& in 2art @& towar+s the en+:
It has 3een printe+ on pa6e no !=": The sentence 3e6ins with 11The Task Force sha**
e9amine the impact o0 the propose+ imp*ementation o0 the Goo+s an+ Ser5ices Ta9
(GST :::11
I0 one 6oes 3y the terms o0 re0erence& this Task Force was man+ate+ on*y to st-+y the
I$2.CT o0 the propose+ chan6e in the rea*m o0 in+irect ta9ation& an+ not to 6o +eeper
into 5ario-s 0acets *ike the GST mo+e* 3est s-ite+ 0or the co-ntry< the potentia* ta9 3ase<
the mo+a*ities o0 the imp*ementation o0 GST inc*-+in6 thresho*+ *imits& composition
*imits an+ treatment o0 inter-state transactions: .s o-r -n+erstan+in6 6oes& this Task
Force was not aske+ to in+-*6e itse*0 into a para**e* homework -n*ess there was a secret
-n+erstan+in6 in which case the p-3*ic has a ri6ht to know: For its +etai*e+ homework&
the Empowere+ Committee a*on6 with its o00icia*s ha5e 3een spen+in6 p-3*ic money on
tra5e**in6 o0 its key ne6otiators an+ ho*+in6 ta*ks with the Centre1s representati5es: Then&
what was the nee+ 0or another set o0 st-+yA It is common sense - +eci+in6 the thresho*+
*imit is the prero6ati5e o0 the ne6otiatin6 parties an+ not o0 the Finance Commission:
The 3asic ass-mption 3ehin+ the impact-ana*ysis-man+ate 6i5en to the Task Force was
that the mo+e* *e6is*ations wo-*+ soon 3e in p-3*ic +omain 0or nationwi+e +e3ate& an+
the Finance Commission may st-+y an+ 6i5e its 0ee+3ack a*on6 with the inp-ts comin6 to
the ne6otiatin6 parties 0rom 5ario-s stakeho*+ers in the economy: B-t here is a case
where an inch o0 space o00ere+ to the Task Force has 3een con5erte+ into mi*es o0 it 0or
its e9tra-8-ris+ictiona* commentary:
Worse& e5en 3e0ore the ma8or components o0 the GST re6ime are a6ree+ -pon 3etween
the ne6otiatin6 parties& the Task Force has 8-mpe+ the 6-ns to make its comments p-3*ic
on 5irt-a**y a** the key 0eat-res o0 the propose+ chan6es: The Finance Commission1s
man+ate& i0 one 6oes 3y the history o0 protoco*s& cannot 3e to s-66est proce+-ra* iss-es
*ike monitorin6 o0 comp*iance an+ the 0ramework to a+minister GST: These are typica*
a+ministrati5e works which 0a** within the e9c*-si5e +omain o0 the E9ec-ti5e& an+ not a
temporary 3o+y *ike the Finance Commission:
What happens when a temporary 3o+y e9cee+s its man+ateA So 0ar as IGST is concerne+&
the Empowere+ Committee has a*rea+y re8ecte+ the 1Bank $o+e*1 in response to serio-s
o38ections raise+ 3y many States: 4etiBens may *ike to 6o 3ack to the #isc-ssion 2aper
an+ 0in+ o-t 0or themse*5es which IGST mo+e* has a*rea+y 3een appro5e+ 3y the EC: B-t
this Task Force has on its own s-66este+ a $o+i0ie+ Bank $o+e* which harps on the
wis+om o0 co**ectin6 ta9 re5en-e with minima* costs: .n+ 0or the same& it wants the
e9cheC-er to tota**y re*y on the ro3-stness o0 IT In0rastr-ct-re o0 the 3anks which wo-*+
a*so reconci*e the Inp-t Ta9 Cre+it acco-nts: In a n-tshe**& this mo+i0ie+ system is to
rep*ace the Centra* Go5t in the IGST mo+e*: .n+ a** this is to 3e imp*emente+ at the cost
o0 the Centre:
TIOL wo-*+ 3e carryin6 a series o0 artic*es on the technica*-0*esh o0 this report in the
comin6 +ays 3-t to+ay& we wo-*+ *ike to 0oc-s on some o0 the i+iosyncrasies o0 the
Finance Commission: First& is it not an awkwar+ rea*ity that the Finance Commission
han+picke+ a 6ent*eman& s-ppose+*y an e9pert in #irect Ta9es to hea+ the Task Force on
the most important In+irect Ta9 Re0orms: Is it not a case o0 askin6 an En6ineer to st-+y
an+ comment on a comp*icate+ 3ypass s-r6eryA Secon+*y&how is it that #r Di8ay ,e*kar
co-*+ not 0in+ any3o+y either 0rom the CBEC (the imp*ementin6 a6ency 0or the CGST
or the State D.T to 8oin this Task ForceA Thir+*y& the a-thors o0 this Task Force Report
ha5e trie+ har+ to 3orrow an a-ra o0 cre+i3i*ity 3y pro0-se*y thankin6 0o-r key o00icers
0rom the CBEC who ha+& TIOL is in know o0 this rea*ity& +e3-nke+ the 3asic ass-mption
ma+e 3y $r .r3in+ $o+i& 0or arri5in6 at the Re5en-e 4e-tra* Rate: When the
0-n+amenta*s scripte+ 3y $r $o+i were themse*5es p-nct-re+ 3y the CBEC o00icia*s&
what p-rpose +oes it rea**y ser5e 3y thankin6 them an+ then& i6norin6 their reser5ations
an+ recommen+in6 the same 0*awe+ an+ mis*ea+in6 Re5en-e 4e-tra* Rate 0or workin6
o-t the ta9 3ase:
.*tho-6h the i6noram-s may we*come this report 3-t the 0act remains that this wo-*+
0-rther a++ to the pre5ai*in6 con0-sion an+ may not *ea+ to ch-rnin6 o0 any new set o0
wis+om: It wo-*+ 3e a +esira3*e 3eha5io-r on part o0 the EC an+ the Centre to +isco-nt
a** those +etai*s which are not re*ate+ to the man+ate 6i5en to the Commission& an+ 0oc-s
on ironin6 o-t their own +i00erences to arri5e at so*i+ 0o-n+ations 0or the propose+
re6ime: Let1s hope that the -nso*icite+ in0ormation +oes not +e*ay the ro**-o-t any 0-rther: