Authoritarian and majoritarian: WB FM on GST Council

NEW DELHI: The Goods and Services Tax Council (GST), which was driven by consensus earlier, has become authoritarian and majoritarian in approach, West Bengal finance minister Amit Mitra said on Monday indicating the widening political rift within the federal tax body.

Mitra said that bureaucrats have taken over key committees which result in undermining the powers of the elected members of the Council. In a virtual press briefing, Mitra said that states gave up 70% of their taxation rights to embrace GST as consensus was the approach for decision making earlier.

Mitra said he has cordial relations with union finance minister Nirmala Sitharaman and his submission to her was to reflect on these vital matters.

There is a “dramatic shift from consensus mechanism to authoritarian and majoritarian approach in the GST Council,” Mitra said. “It destroys the only federal institution in the country,” he said.

Mitra’s concerns are linked to the non-acceptance by the Council of his demand for zero GST rating of key medical supplies needed for Covid management or subjecting them to a token 0.1% both of which would have enabled tax reduction to consumers as well as availability of tax credits to producers. Mitra’s demand for full tax relief is also shared by some of the other opposition ruled states such as Kerala and Punjab. The Council, however, preferred to keep most of the items at 5% rate.

On Saturday, it announced reduction of taxes on several medical supplies including oxygen, ventilators and testing kits from 12% to 5%, ambulances from 28% to 12%, furnaces for crematoriums from 18% to 5% and two drugs from 5% to zero. Several states have been asking for full tax waiver on Covid related medical supplies.

He also pointed out that for FY21, states’ revenues have contracted by 3% and hence they should be compensated by a further ₹63,000 crores. The earlier compensation calculations were based on much more optimistic assumptions.

Mitra pointed out that a panel of officials led by a central government official, which was set up to take care of procedural matters, is now amending rules which are only placed before the Council for reporting purposes, not for ratification.

Also, the fitment committee sends detailed proposals only close to the Council meeting which leaves ministers with little time to examine them, Mitra claimed.