cede sovereignty to GST Council
April 07, 2017
Chidambaram says this is a case of shared sovereignty; feels
govt will need to amend the ‘imperfect’ GST Bill in 18 months
Former Prime Minister Manmohan Singh and his Finance Minister P
Chidambaram prevailed on their colleague Jairam Ramesh not to
press an amendment to the GST Bills in the Rajya Sabha.
Chidambaram explained to BusinessLine why it is necessary to
ensure, in principle, that Parliament or the State legislatures
do not interpose in the recommendation of tax rate by the GST
Council. In the same breath, the former Finance Minister also
maintained that the “imperfections” imply that the legislation
will have to be amended within 18 months. Excerpts from the
It transpires that you and Manmohan Singh prevailed on the
Congress to not push the amendment that Jairam Ramesh was
seeking. Can you explain the objective of the amendment, and why
The only amendment which my colleague Jairam Ramesh proposed to
move was intended not to block the Bill, but to assert
Parliament’s right to approve the rates recommended by the GST
Council before the Central government formally notifies them.
The Bill as it stands says the GST Council will recommend and
the Centre shall notify. The amendment interposed Parliament
between the GST Council and the Centre. We pointed out that such
a provision is present in the CGST, IGST and SGST Bills. If you
interpose Parliament in the the CGST and IGST Bills, the States
will also interpose the State legislature in the SGST Bill. And
if one legislature of the 29 legislatures does not approve the
rates, the rates recommended by the GST Council — the whole
thing will unravel. Therefore, we said this is a case of shared
sovereignty where Parliament and the State legislatures cede
sovereignty to another Constitutional body, namely the GST
Council. We are of the view that we should not interpose either
Parliament or the State legislatures between the recommendations
made by the GST Council.
This is the principle of ceded sovereignty. Once it is
recommended by the GST Council, it should be binding. I think
this is the correct principle which needs to be followed in the
case of a tax which will be in the jurisdiction and administered
by both the Centre and the States.
You and the Finance Minister seem to be in agreement over
that. Is there similar consensus now on other issues the
Congress has been raising?
We have many objections. I was only talking about the amendment.
Let me reiterate that this is an imperfect Bill. Going forward,
I have no doubts in my mind that the present government will
feel the need to amend the Bill in about 18 months. If this
government does not, I am sure the successor government,
whichever party it may be, will have to amend the bill in 24
There are many provisions that require to be redrafted or more
precisely drafted. For example, the multi-rates this is not a
one-rate bill. There are multiple rates that will eventually
require to be converged from five to three, to finally one. I
think there are amendments needed in the compliance provisions
returns, annexures, periodicity of the returns. Amendments will
be required as we gain experience about implementing the tax;
amendments will be required in the powers that are being given
to the taxation officers. Once the government finds that
excessive powers are being conferred, it itself may want to
amend that. Section 171, the so called anti-profiteering
section, has to be deleted; that will require an amendment.
There is contradiction between making an offence non-bailable,
while at the same time, making it compoundable. A compoundable
and non-bailable offence are mutually contradictory. As we work
this Bill, I am sure the government will find there are other
sections that require to be amended.
But why not introduce them as amendments?
That will require further discussion, reference to a select
committee, and I don’t think the government is prepared for
that. Once the Lok Sabha has passed it, the Rajya Sabha is
pretty much helpless in stalling it. Therefore, the more prudent
course is to allow the Bill to go through, but enter the caveat
that this Bill will require amendments.For what purpose would we
introduce amendments? It is a Money Bill. Rajya Sabha amendments
don’t carry any weight. It would have gone back to the Lok Sabha
and it would still have passed the original Bill. Our objections
are on the record. Our objections are warning bells to the
government that as you implement the Bill, you will find the
need to make changes.
Do you agree with the Left that these should not have been
classified as Money Bills?
This is a Money Bill. There is no doubt about that. Any taxation
Bill is a Money Bill. Please remember what I said when the GST
Constitutional amendment was being debated — that the GST Bills
will be Money Bills. But I urge you not bring it as Money Bills
so that both Houses have an equal say in shaping the final Bill.
The government had a choice. It had the right to bring it as a
Money Bill. But a more statesmanlike approach would have been to
not bring it as a Money Bill; get all the inputs, including
those from the Rajya Sabha, and work out a Bill which meets the
requirements of both the Houses. But I am not surprised at what
this government has done. It was too much to expect of them.
When non-money Bills are being brought as Money Bills, then it
is perhaps too much to ask for a Money Bill to not be brought as
a non-money Bill.
The Congress has raised the issue of tax slabs, exclusion of
commodities. What are your other concerns?
We will have to wait and see what the rules and the fitments
are. Our main concerns are rules, the compliance and enforcement
provisions. There are thousands and thousands of goods and
services. How are they going to fit each good and each service
into a rate structure; we will just have to wait. If 70 per cent
of the goods and 70 per cent of the services by value are fitted
into the modal rate of 18 per cent, I would give high marks to
the implementation. But if a very large proportion is fitted
into the highest rate of 28 per cent, that will necessarily mean
that an equally large number of goods have to be fitted into the
lower rate of five per cent to compensate. All that will mean
that we are moving away from the one-tax-one-nation principle.
That will be known only when the fitments are done and known.
When we moved in service tax from a positive to a negative list,
and brought within the ambit of service tax the whole universe,
I called my officers and told them: “It is a new law, we are
applying it to the whole universe of services. A lot of people
don’t understand the service tax. A lot of them will not even
know what they are doing is taxable. Therefore, administer the
law in a benign manner for the first few years.” That is why, in
terms of revenue, the service tax today is a success story. It
is the fastest-growing tax. Likewise, this law must be
administered in a benign hand so people get used to the idea of
a GST. It will take time. If you apply the law with a harsh
hand, there will be a backlash.
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