Three days after the meeting on GST of state finance ministers with Union Minister Arun Jaitley, Kerala’s Finance Minister Thomas Issac, a member of the CPM Central Committee, distanced himself from the Congress’s demand of a cap of 18 per cent on the GST rate.
He said he “did not know what made them (the Congress) make such an amendment” and added that he “did not find any reason to stand in the way of the GST”.
Issac said his state stands to gain from the Goods and Services Tax and added that the CPM will not accept the Congress’s proposed amendment on the GST ceiling rate. The Bill is stuck in Rajya Sabha where the ruling coalition lacks numbers.
On the Congress’s demand, Issac told The Indian Express, “That way, states’ rights would be curtailed forever. Like professional tax for the local government… that we will never accept. I don’t know what made them (the Congress) make such an amendment. So we will move our amendments to raise our protest, but we are not going to stand in the way.”
He said the GST would be a boon for a consumer state like Kerala. While the CPM is not opposed to GST, its official position has been that some of its provisions are likely to adversely impact the country’s federal structure. Regarding that concern, Isaac said, “CPM’s criticism is regarding abridgment of state’s rights, but that was already done during the VAT.”
He said that with the implementation of the value-added tax (VAT), states have already abrogated their right to compete with others on the basis of lower taxes since the empowered committee of state finance ministers had been handed out the mandate to stipulate floor rates below which no state could dip.
“And you cannot rebel. Suppose you go for a higher rate, people will just go across the border and buy it and come. And you cannot have an entry tax,” he said.
“So already you lost your right. Only it is de facto, not de jure. But now moving to GST, you don’t lose anything more. On the other hand, you get access to service tax. Secondly, as a consumer state, Kerala would gain. Ideologically, the criticism that state would lose right to tax, etc remains, but in practise, when you look at things, there is no choice for you. In fact, having gone to VAT, the sooner you go to GST, the better it is for states because you get access to service tax,” he said.
He said that even if the states’ revenue does not go up, they will get “fully compensated” for five years. “Further, now the thinking is that states will get 9 per cent tax and Centre only 8 per cent. We will try to make it 10 per cent and 8 per cent. Facts are rational,” he said.
Asked about his party’s reservations, he said, “Reservation is there because Constitution is being amended to take away the taxation power of the state. So de jure also they will lose the power. What has been lost de facto will become de jure. But that is a nicety you can ideologically criticise. But as practising Finance Minister of Kerala, I will be foolish to say I don’t want it.”
“The party also is not opposed to it. We have accepted it in principle. Certain points like composition of the council, we want greater say. That is one major criticism. Second is we would like to have states to have higher rates. That is something being negotiated and there are other small small things,” he said.
“We have certain basic criticism. That we will continue to propagate. It is a propaganda position but this is something which we had resolutely opposed at that time and we had lost. Having lost that right at that time, I should not find any reason to stand in the way of the GST. You have already lost your taxation right. So you go and make the best out of the situation… you get service tax,” he said.
The CPM’s position on the Bill was made clear in a dissent note given by CPM member K N Balagopal in the Select Committee looking into the Constitution Amendment Bill. He had argued that “some provisions of the… bill are likely to adversely impact the federal structure of the country”.
The GST aims to integrate the country into a common market by removing barriers to trade that exist across states. It will subsume all indirect taxes of the Centre and states, including excise duty, value-added tax, service tax and octroi.