Maharashtra on Monday became the tenth state to ratify the Goods and Services Tax (GST) constitutional amendment bill passed by the parliament. All parties in the state legislature supported the bill moved by the Bharatiya Janata Party-Shiv Sena government. The bill was passed by voice vote in both houses of the state legislature.
Moving the resolution to seek ratification of the GST constitutional amendment bill in the assembly, Maharashtra finance minister Sudhir Mungantiwar said the GST would not only support the Make in India programme but would also make “India one” as a market. He said the revolutionary tax reform would end the cut-throat competition among states to offer discretionary and variable tax rates.
Maharashtra would particularly benefit from the GST regime as it was the leading manufacturing, consuming, and also service sector state, Mungantiwar said. “Maharashtra accounts for 19.62% of the national service sector,” Mungantiwar pointed out. He admitted that people had doubts about the eventual rate of tax.
Mungantiwar said Maharashtra’s 17 taxes would be subsumed in GST. “This includes value added tax, central sales tax, lottery tax, sugar purchase tax, octroi, various miscellaneous taxes and surcharges etc. At the same time, the GST regime would not take away Maharashtra’s right to levy tax on liquor, stamp duty, and electricity duty,” he said.
Supporting GST ratification, leader of the opposition in the legislative assembly Radhakrishna Vikhe-Patil reminded the BJP-led government that it was the Congress-led United Progressive Alliance which had initiated the GST reform. “Please tell your cadres when you make a speech on GST reform that it was the Congress which took the initiative. That would answer the charge routinely made by your party workers that Congress did nothing for the country in 60 years,” Vikhe-Patil said.
Senior Nationalist Congress Party (NCP) leader and former Maharashtra finance minister Jayant Patil supported the GST bill but expressed doubts over Prime Minister Narendra Modi’s claim that GST would boost economy. “There is no evidence from nearly 150 countries that have implemented GST to suggest that it has necessarily boosted the economy. It will definitely lead to transparency, but GST regime will take three to four years to stabilize,” Patil said. He asked the Maharashtra finance minister to come up with the eventual tax rate in Maharashtra legislature’s winter session in December.
Patil, however, said the general expectation was that the tax rate would be capped at 18%. “There is a possibility that people would accept this rate of tax,” Patil said.
The NCP leader was critical of the provision in the proposed GST council mechanism which he claimed was heavily biased in favour of the Centre and against the states. “The provision says that even if all states or 66% of the GST council opposes something, the Centre with only 33% weightage can overrule and veto states. This is not in keeping with the federal structure,” Patil said. He urged the Maharashtra finance minister to put forth his opposition to this provision on behalf of the state.
Patil also expected more clarity on the mechanism to provide compensation to states and local bodies after local taxes get subsumed in GST.
Shiv Sena legislator Sunil Prabhu raised questions about the autonomy of the urban local bodies since GST would subsume local tax like octroi which the Brihanmumbai Municipal Corporation collects. “The BMC stands to lose Rs. 7000 crore per annum on account of the loss of octroi after GST implementation. The GST amendment bill promises to compensate the BMC for this loss for five years. But the state bill that will be brought in the winter session needs to clarify what happens after five years. Also, there is 8 to 10% increase per year in the octroi collection. Is the compensation going to take care of this? The state bill should clarify,” said Sunil Prabhu.