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"Big trading firms can afford to hire chartered accountants but small traders, traders in smaller towns and villages, small scale entrepreneurs need to be aware of the GST compliances that they are expected to fulfil. All this can not happen before July 1. Hence, it needs to be deferred till September 2017"
Maharashtra government will hold a three-day special session of both the houses—legislative assembly and legislative council—to ratify the Goods and Services Tax (GST) bill. Maharashtra will implement GST from July 1, 2017. THE WEEK spoke to Prithviraj Chavan, former chief minister, at length about the present nature of the GST bill, its journey and his suggestions/apprehensions.
You were the first to point out a few shortcomings in the GST bill presented in the assembly. What are those?
Although I pointed out just a few, the absence or lack of vision is very evident in the governance of this BJP government. Look at the impact of the abolition of local body tax (LBT). Municipal bodies were charging LBT on the goods imported and sold in their areas. It was a source of revenue for them. But the BJP government abolished it as soon as it assumed power, only to appease the trader lobby. Now, the Union government has decided a benchmark date to compensate the loss of revenue for the local self governments. Since 2015, LBT is not a source of revenue for local self government bodies. Had it been a revenue source, as of 31 March 2017, the state would have received Rs 6000 crore annually for the next five years. So, sheer lack of foresight caused a loss of Rs 12,000 crore since 2015 and a loss of Rs 30,000 crore till 2022. The total loss accrues to Rs 42,000 crore.
So, is this the reason that you are unhappy about compensation to the municipal bodies?
This is one of the reasons to be unhappy about the unjust compensation offered to the municipal bodies. The other reason is that the central government is going to give an annual increase of 14 per cent on previous year's compensation to the state for these municipal bodies. But the state will extend only 8 per cent hike on the previous year's compensation. How did the state government arrive at 8 per cent hike. Why did it reduce the increase in compensation by 6 per cent. What will the state do with the balance amount? Those are the unanswered questions. Growth of any town, city or district depends on infrastructure development. How can the state assume or restrict it to only 8 per cent? The upcoming international airport in Navi Mumbai will create a boost in infrastructure, real estate, trade, industry, employment and population. The government must answer as to how it arrived at only 8 per cent increase. Such an important bill is not expected to create ambiguities.
The government has charged GST on leasing out agriculture land and lakhs of farmers in Maharashtra do that. How do you see that? What will be the consequences of this tax?
We have objected to this. Lakhs of farmers cultivate on leased land. Unpredictable weather, rising input costs, failure of crop insurance protection and inadequate prices/MSP (Minimum Support Price) have already broken them. They will simply get wiped out if tax is levied on the land they cultivate.
Is the state government well equipped in terms of technology, training, infrastructure and public awareness to bring about about the proposed complete change in taxation system?
Of course not. That is precisely why I have asked them to defer the implementation till September. I hope that good sense will prevail. 3500 posts are vacant in the sales tax department. The process of recruitment is yet to begin. Then comes the training. The software is not yet ready and has to be malware-proof. People are yet to be sensitised about the new tax system as the traders will have to file 37 different GST returns in one year. Big trading firms can afford to hire chartered accountants, but small traders, traders in smaller towns and villages, small scale entrepreneurs need to be aware of the GST compliances that they are expected to fulfil. All this can not happen before July 1. Hence, it needs to be deferred till September 2017.
How has government responded to your apprehensions?
Their approach is very typical. They say “everything will happen”. We need to know whether the state government has worked out on how much revenue needs to be restructured? How much of it will be from State GST (SGST) and integrated GST (IGST)? How is the government going to ensure it? According to the Act, it is mandatory for the central government to compensate state governments for the loss of revenue. The state, too, should make it mandatory on itself to compensate all local self governments for the loss of their revenue. All these things are not properly answered and not there in the draft bill.
Why is the government creating an impression that Congress was opposed to the bill and tried everything to delay it?
This is the worst mockery of facts. It was BJP and the then chief minister of Gujarat who adamantly opposed GST for ten years. P.Chidambaram, then finance minister, had proposed to implement GST in his 2006 budget speech. He had formed the committee of finance ministers from all states. PM Modi had then publicly vowed not to let GST pass. He opposed saying that GST would be harmful for the federal structure. Saurabh Patel, then Gujarat's finance minister, and Raghavaji, then finance minister of MP, had opposed it in the empowered committee. Modi had also said that infrastructure of communication and IT was insufficient. The government cannot provide electricity for that. Government will have to provide diesel generator sets everywhere. For such frivolous reasons, BJP opposed our bill for 10 years. Our GST bill had a maximum tax slab of 18 per cent, while the present one has 28 per cent.