GST good sense

When the Left Front lost power in West Bengal in the recent assembly elections,one consequence was that the empowered committee of state finance ministers that was supposed to guide the implementation of the Goods and Services Tax,or GST,lost its head. The Centres first choice to replace Dasgupta was from the BJP: Bihars deputy chief minister,Sushil Modi. That didnt happen; Modis party didnt want to be seen as cooperating with the Centre at a time when it seemed the UPA was on the defensive. Yet Modi,although not the point-person for the GST,hasnt allowed himself to be silenced; he told The Sunday Express: The GST is in the interest of the country. It is in the interest of the states. Even when the NDA government proposed VAT,many states had opposed and expressed reservations. But ultimately,states have gained. GST is phase II of that process. I believe states will be the gainers after implementation of GST.

This an admirably precise statement of what is,indeed the case. The GST will aid tax collections,allow for growth,and bolster state revenues. There will,of course,be an adjustment period,and some states will have to alter their tax-collection structures. But the BJP is playing petty politics with what is one of the most crucial reforms of the past 20 years,and one essential to kick-start what is becoming increasingly clear is a faltering economy. Modi is to be appreciated for sticking his neck out and saying that he will attempt to convince his party into seeing the merits of the proposal. The BJP has committed itself to a simpler tax system in its manifesto,and BJP-ruled states were among the first to implement the VAT.

The GST is not an ordinary reform. Not only does it have the potential to complete rework and invigorate the interface between the productive sectors and the state,but it also requires more work than most. It requires,after all,a constitutional amendment: in other words,it needs the approval of two-thirds of Parliament and half of the state assemblies to come into force. In other words,the BJP could block it quite easily. The prime minister has in the past singled out the Gujarat government for making a U-turn on the GST for non-economic reasons. Hopefully Sushil Modi will be able to persuade his partys other Modi to reverse his stand.