Amma Wants Central GST also to be handed over to States
IN a letter to Prime Minister Modi, Tamil Nadu Chief Minister Jayalalithaa has suggested a simpler structure of completely delegating the levy, collection and appropriation of the substitutes for VAT, Central Excise Duty and Service Tax within a State to the State machinery, with the Central machinery focusing on inter-state taxation. She says “Not only would such an arrangement be administratively much simpler, but it would also ensure that the original Constitutional design of fiscal federalism of leaving the States in complete control of at least one sizeable source of revenue is preserved. I believe it is still not too late to move forward on GST by putting in place the elegant solution I have suggested .”
She also wants an independent compensation mechanism. She adds, “The State's experience with the Centre's compensation mechanism both for the introduction of VAT and the reduction of Central Sales Tax has been far from satisfactory and does not inspire confidence that a fair, hassle-free and workable compensation mechanism can be devised and implemented”.
Though the Tamil Nadu CM has just revealed this plan, it was heard in the corridors that there was a proposal to hand over GST to the States to be administered by the VAT Departments with the inter-state GST being handled by a Central GST Board (not the CBEC). One reason for all these changes is the fear of harassment by the Service Tax officers of CBEC. CBEC Chief has already gone on record that she is not being consulted on GST - maybe it is slipping out of her hands. Will the CBEC be stuck with an army of 80,000 employees with no excise, no Service Tax and no GST?