GST Stuck? Karunanidhi opposes
DMK Chief Karunanidhi does not like GST. In a letter to the Prime Minister and all Chief Ministers he is reported to have expressed serious concerns about the proposed GST as
1. It is highly regressive.
2. Has "flawed design".
3. Its impacts have been exaggerated while its serious drawbacks have been underestimated.
4. The incidence of taxation on the articles consumed by the common man will rise, while the rate of tax on luxuries will fall.
5. The proposal that all states must have a uniform rate is diametrically contrary to the federal principals of the constitution, as it reduces the autonomy of the states.
6. At a time when decentralisation of power to lower tiers (like local bodies) is being advocated, this move will be in the opposite direction, towards centralisation of powers.
7. There were no reliable estimates available on the potential benefits to the states under the proposed system.
8. Most of the discussion on 'revenue gain' for states is based on purely speculative estimates at best, and wishful thinking at worst.
9. GST model will bring into central excise jurisdiction lakhs of small and medium enterprises which are currently exempt.
10. It will also be highly unpopular with SMEs who will suddenly see a doubling of inspector raj.
11. VAT experience on compensation arrangement for revenue loss to the states does not inspire confidence to go for another uniform tax regime.
12. Our experience under VAT has been very bad. Bureaucratic obstacles and movement of goal posts by the Finance Ministry has given us a raw deal. Rs 4,055 crores of our claims remain outstanding.
13. VAT was implemented when the economy was booming. Implementing a revenue negative new system during a slowdown will pose a much higher compensation burden, at a time when the Centre has been unable to meet its fiscal deficit targets.
14. The idea of a fixed rate of Central GST would handcuff the Central Government's fiscal policy.
15. If the proposed GST had been in place, the much needed stimulus packages in which excise duties were cut twice would not have been possible.
Karunanidhi's proposals are sure to be lapped up by many Chief Ministers. Many of them are scared that they will lose one of their Kamadhenu departments.
Litigation, complications, mind boggling rules, inexplicable calculations, plethora of contradictory case laws – these are the ingredients which give the Babu and the Neta the power to lord over the Citizen Taxpayer – and why should they give them all up?
The political fact since 1971 had been that any Central Government that was dependent on the DMK or the AIADMK was always jittery – but the fact now is that the Central Government is not really dependent on the DMK support and actually the DMK Government in Chennai is dependent on the Congress support. If this equation is accepted as a political fact, the Karunanidhis of this world will act more responsibly.