The Finance Minister, Mr Pranab Mukherjee, has told the State Finance Ministers that they are free to fix their own State GST rates, but hopes that they would not exercise this freedom after a consensus is reached in the GST Council. He, thus, has conceded a major demand of the States that the Union Finance Minister should not have the last word on the State GST rates.
Respecting the primacy of the legislature in the area of taxation, Mr Mukherjee said that the GST Council will only have a recommendatory role. The revised draft of the Constitutional Amendment Bill now proposes that the decisions of the GST Council would be recommendations to the Union and the States. “Since these decisions would be taken by consensus, it is for us to respect them and develop a healthy convention of abiding by them, as is the case with several other constitutionally mandated bodies,” Mr Mukherjee said in his address at a meeting with the Empowered Committee of State Finance Ministers here Wednesday. The “binding” nature of GST Council decisions had earlier drawn comments from various States from the perspective of loss of autonomy. “Even if the Council's decisions are not binding, they would be useful as guiding principles which we would choose to ignore or violate only in very grave or exceptional circumstances,” he noted.
STATES SEEK POSTPONEMENT
Even as some State Ministers expressed reservations on the introduction of GST by April 2011 and advised further postponement, Mr Mukherjee asked the States to make all efforts to meet the timeline of introduction of GST by April 2011. “The wisdom lies in moving ahead with the Constitutional Amendment without any further delay as a preparatory step for the introduction of GST. It must be appreciated that the Constitutional amendment is only an enabling provision. It does not prohibit us from continuing our dialogue on rates, exemptions and other issues related to GST,” he said.
On the GST Dispute Settlement Authority, Mr Mukherjee defended its establishment through the Constitutional Amendment Bill, stating that there should be a provision for setting up an independent and autonomous forum to resolve disputes arising on rate variations.