March 29, 2017
Saugata Roy speaks on GST Bills in Lok Sabha
Our Speaker Kalyan Banerjee had earlier supported the GST Bills. I do support them also because in the Manifesto of our party in 2009, we had supported GST. In the GST Council, Bengal’s Finance Minister fought for many rights of the States while supporting the GST. He has been able to bring some modifications.
Why did we support the GST at all in the Inter-State Council? It is because we consider that it would benefit the country, the people. It would bring down the tax-related inflation and it will also bring down tax in India, which is roughly 30%.GST would also remove inefficiencies in supply chain due to savings on transport, warehousing and inventories.
We have to see that the physical conditions of the States do not deteriorate. Sir, here in this Parliament when the 101st Constitution Amendment Bill said that the Centre “may” compensate the States, we fought for making it “shall” compensate the States. Ultimately, now it has been put “for five years”; earlier the Centre was saying “up to five years”. West Bengal demanded in the GST Council that it has to be made “for five years” and it was made so. But see how the compensation to the States will be worked out. At present, cigarettes have tax up to 65 per cent, luxury cars, above 45 per cent, sugar-added aerated drinks, 44 per cent, pan masala, 50 per cent. After five years, this cess will be used for paying compensation to the States. After five years, the standard tax will be 40 per cent.
Now the question is, the revenue expected from these cesses is roughly Rs 65,000 crore. And the Centre says environmental cess will be there to the extent of Rs 24,000 crore. The two added comes to Rs 79,000 crore. It has been estimated that, with the revenue of the States falling, the amount might well go up to Rs 90,000 crore. Where would this extra money come from to compensate the States? That has not been made clear.
It’s true that, as I had already said, small businesses must benefit. So Rs 20 lakh has been kept as a threshold for registration and a large number of businesses would be out of GST for this purpose. The composition scheme for manufacturers and traders, you don’t have to pay that. If you are below Rs 50 lakh, you can pay 0.5 per cent, 1 per cent and 2 per cent. If the turnover is below Rs 1.5 crore, 90 per cent would be with the State and 10 per cent would go to the Centre. It would be tough work to determine which items would be with the Centre and which would be with the States. And then, if it is above Rs 1.5 crore, there will be cross-empowerment, that is, the States will get half and the Centre will get half.
So, GST is cross empowerment and the input tax credit (hereafter, ITC) is given there. Now what do I envisage as the problem in GST? Let me mention clearly the Centre is since to be in a hurry to pass GST but have not yet fixed the rates. There are almost 4,000 items whose rates have to be fixed. You have fixed the basic rates: zero, one, five, twelve, eighteen and twenty eight. But, what about the rate of the individual commodities? That you have not fixed.
There will be a problem of fitment. Say one tax rate is 15%, how will it be fitted in 12% or 18%? These basic questions have not been resolved. They have only had 10 meetings of the GST council. Who will fix these rates? This will be the most contentious issue of all. Even the businesses are totally unprepared for GST; they do not know what tax they will pay because they do not know what rates there will be. What will the small businesses do?
Sir, the biggest problem of this is the GST Network (GSTN). I have mentioned earlier that the Government formed a Sec 25 Company to run the GSTN. It is not yet ready, aa result of which they have put Infosys as manager and service provider at Rs 1380 crore. GSTN has to operate in 17 languages. Whenever it will be ready, it will be the world’s biggest computer system, and, as Mr Moily correctly pointed out, it will be a technological nightmare. If there will be any breakdown in the server, all over the country GST will go flat. So, Sir, I want the Government to be very careful. Government has said that they will train 60,000 officers for this job. For that, at least six months are necessary.
Sir, I said that a single market is a good idea but you see the example of Australia, or that of Malaysia; GST is facing serious problems in these countries. So, instead of hurrying let us put the systems in place. No political party in the country has opposed GST in principle. We are worried about the fallout this will have.
And ultimately last point. Sir, prices should not increase. In the year of transition, Government must ensure that.