TIOL - COB( WEB) - 226
FEBRUARY 10, 2011

By Shailendra Kumar, Editor

FROM a historic low, the GST caravans are once again up on their feet. Although some of the key States are scheduled to go for the State Polls but the Empowered Committee headed by Mr Asim Dasgupta has roped them in for yet another consensus-building event. The EC is going to meet again on Friday (February 11), and the Centre has decided to leave no stone unturned to make it move at least a few inches forward. It is universally known that when an event of GST magnitude runs out of steam and comes to a halt, it acquires inherent propensity to roll back. And thus, the gains made over a period of time evaporate into thin air, and a fresh beginning has to be made. Being acutely aware of this elementary knowledge of applied physics, the Finance Minister, Mr Pranab Mukherjee, seems to be giving the truest best of his best to the GST cause. In fact, in political circles, he is identified as a solitary torch-bearer for GST. In other words, even as many of his Cabinet colleagues and virtually the majority of State Finance Ministers have given up on GST becoming a ground reality in the near future, Mr Mukherjee has not done so. He knows that his position is that of the powerful wheel of history if a new chapter in the fiscal reforms of India has to be written.

Keeping in mind the 'de-constructionist attitude' of the Opposition parties, and the known 'apples of discord', Mr Mukherjee had some time back got his GST Team to water down the proposed Draft Bill on Constitutional Amendment which has now been sent to the EC's Secretariat for Friday's discussion at Vigyan Bhawan. Netizens may recall that the many of the States had vetoed the powers of the proposed GST Council and Dispute Resolution Authority (DRA) on the ground that the powers of the GST Council completely pulverises the autonomy of the States. They had also alleged that the proposed Council has an inherent bias in favour of the Centre. They had also questioned the authority of the DRA. Since both these bodies are designed to be creatures of the Constitutional Amendment, States feared that once such an amendment is made in the Constitution, and if their experiences turn out to be contrary, their hands will be tied up and they may not be able to do anything.

Having given labourious thoughts over the States' apprehensions based on conjectures and surmises, the Centre has now completely diluted the Draft Bill where the powers of the GST Council and the DRA have been proposed as 'enabling provisions' rather than a part of the main amendment. In other words, this Draft Bill is solely aimed at vesting powers in both the Centre and the States to levy taxes on the same taxbase, and other creatures like Council and DRA can be created and their functions and powers may be decided later by consensus. In its third attempt of redrafting the Draft Bill, the Centre has completely diluted the original Draft and hopes that the States would now have no cause for disagreement. If that happens, the watered down Draft Bill may get the EC's approval. Even if it does not happen, Mr Mukherjee has earmarked the entire second half on Friday from his Budget-tight schedule for the EC, and is going to make a fervent appeal not to allow the forces of history to slip out of their palms.

Let's presume that the EC gives its nod to it. The next step of the Centre will be to quickly table the Bill in the Parliament during the forthcoming Budget Session itself. Once tabled in the House, it will be referred to the House Panel which would invite inputs from various state-holders and then compile its report to be laid on the floor of the House, followed by final voting process. All these steps would take more than six months, and we would be once again close to 2012 Budget when Mr Mukherjee intends to roll out both the DTC and the GST together.

Why is Mr Mukherjee so insistent on approval of the Draft Bill first? It is because the chain of logical events are linked to it. Only after the Constitution is amended, enabling the States and the Centre to collect taxes from the same taxbase, the GST Act can be legislated. On the one hand, the Centre will table the GST Bill in Parliament, and on the other hand, 30 States will have to do the same in their respective state assemblies. A parallel process which can be taken is that of finalising the common exemption lists of goods and services, the common threshold limits, the composition schemes and the common GST platform which has come to be known as GSTN (GST Network as part of the overall paradigm of National Information Utilities (NIU) IT Architecture).

Only last week Mr Nandan Nilekani has submitted the final report of the TAGUP, which was set up for five unique projects of the Central Government. It is learnt that so buoyed is Mr Nilekani by the robustness of the IT platform he has built for the GSTN that he is going to give a detailed presentation on his readiness to implement the IT platform in the proposed reforms. Mr Nilekani heads the Empowered Group on IT which has recommended setting up of the NIU. What will the GSTN do? It is being designed for the specific functions of - a) Provide common infrastructure and services to Central and State Governments; b) Ensure integration of the Common GST Portal with the existing tax administration systems of Central and State Governments; c) Build efficient and convenient interfaces with tax payers and tax administrators; d) Facilitate, implement and set standards for providing common GST services to the Central and State Governments; and e) Carry out research, study global best practices and provide training to the stakeholders.

For incubation of the GSTN, the EG has identified NSDL. The preliminary work of conducting a proof-of-concept is being undertaken by NSDL and it has been planned to run a GST pilot with the selected State Governments participating in it along with the CBEC. The Group has recommended that the infrastructure for the GSTN should be based on latest technology and ring fenced, so that whenever the spin-off takes place, the GSTN infrastructure is smoothly transferred to the proposed NIU being set up as GSTN. Mr Nilekani's team hopes that once the EC approves his blue-print for IT roll-out, and other components of the proposed GST also move hand in hand, the implementation of the GST may become a reality by 2012.

Let's hope Mr Nilekani and Mr Mukherjee's dreams come true sooner than they expect, and India becomes a common unified marketplace for commerce. It is high time the States rise above their pocket-borough politics and see the needs of the trade and industry so that the Indian economy grows stronger and stronger to counter the ills of global economic meltdown. TIOL sincerely wishes good luck to Mr Mukherjee whose hardwork and honest will for reforms may yield a rich harvest of revenue!