Tuesday, 27 June 2017

Why Modi opposed GST for 6 years as Gujarat CM?

Modi was opposed to the GST Bill for six years when he was the Chief Minister of Gujarat. Maharashtra, Tamil Nadu and Orissa also opposed certain provisions of the then GST Bill. Congress's version of GST was a radically different which included petroleum products & alcoholic beverages as well. The present GST excludes petroleum products & alcoholic beverages. In addition, road tax and passenger tax, toll tax, stamp duty, electricity duty, tax collected by panchayat / muncipality won’t get subsumed in GST. VAT or sales tax on petroleum products contributes to nearly 33% of state revenues, and Centre also earns huge amounts as excise duty on sale of petroleum products. States don’t want to lose the significant revenue currently earned from state excise duty which is as much as 25% of total revenue. GST could have become a reality "at least" four or five years back and India by now could well have been on the path to prosperity had it not been for one Narendra Modi and his party who conspired to scuttle UPA's honest efforts in marshalling the reform. Then BJP-led opposition said Congress’s GST Bill push would weaken states, even called it unconstitutional. After 2014, Chief Minister Modi became PM Modi and his thoughts on GST changed. Between 2011 and 2014, UPA tried to pass the GST Bill with the support of the principal Opposition party BJP but failed. 

My View:
The GST ensures middle & lower class consumers doles higher amounts as GST while rich people doles out lower amounts. While centre ensures its revenues would significantly go up it doesn't care what states lose except giving guarantees of reimbursement for a period of five years. Modi & Jaitley's past three year record shows reimbursement process is saddled with numerous queries and actual reimbursement will be in bits & pieces with delays of few years. GST council decides on future GST rates etc, it is clear that no single or group of states will be able to force any decision as they want while centre could easily do that. This undermines basic constitutional structure of constitution granting fiscal autonomy to states. Worst is that GST bill was introduced as 'Money Bill' in Lok Sabha and Rajya Sabha can only advise Lok Sabha, where as in reality it is a constitution amendment bill to be passed by both the houses. GST laying foundations for economic prosperity is imaginary, prosperity must be within the framework of democratic principles and not at the expense of independence. India is large democracy with complexities and diversities and there is no single pill like GST which can overnight transform it from poverty to riches. Once the euphoria subsides, GST will be like VAT, 10 years ago.

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