The dangers of arguing for special treatment of states with higher contribution to GST pool

 







Of late, the issue of GST concessions on COVID relief is being sought to be projected as a Centre versus states issue. Instead of thinking rationally on how to extend maximum possible support to the affected people in the shortest possible time, an attempt is being made to gain political mileage on an issue of pressing human and national importance. In this process, the structure and design of GST — essentially a tax on consumption — is being questioned. Already settled debates on “rich” states versus “poor” ones, the decision-making process in the GST Council, and the representation of various states in the Council are sought to be re-opened.

One would do well to recollect that the structure and design of GST and its basic features, as enshrined in the 101st Constitution Amendment Act, were unanimously adopted and endorsed by Parliament — a body that comprises every political party in India and reflects the will of the people of the entire country. The broader and finer points of the law, including every section, sub-section, clause and sub-clause, were thoroughly discussed and debated and recommended by the GST Council after a complete consensus. These were further debated and approved by not only Parliament but also by each of the state legislatures. The kind of consensus seen on every issue of GST has probably not been witnessed on any other issue. There was complete consensus even on the issue of delegated legislation — something unheard of in a federal environment.

This process of consensus building accorded the same seriousness to a view expressed by any of the so-called “smaller” states as was given to an alternative view expressed by any of the bigger states. No state was accorded even the slightest of special privilege. That is why the consensus surrounding GST was unprecedented whether in India or any other federation. One would do well to recall that none of the numerous decisions, barring one on a very trivial issue, taken in the 43 meetings of the Council involved voting — even on that rare occasion none of the states, barring one, wanted voting. This speaks volumes of the degree of maturity exhibited in the deliberations of the Council. Having come so far, one decries any attempt to reopen some of the fundamental issues.

There is another dimension to the higher revenue collection in a few states. One may note that such states enjoy locational or geographical advantages, being mostly coastal and immensely suited to the needs of trade and distribution as also manufacturing. In this context, one may recall that the disadvantage to such states on account of lower availability of certain vital minerals like coal and iron ore was undone by the principle of freight equalisation resorted to in the years following Independence. This contributed, in no small measure, to the development of such states.

The argument of unequal transfers of central receipts also does not hold water, either in India or in any other federation; it is like saying that those members of a family who earn relatively less should be given less to eat. As is well known, such transfers are intended for correcting horizontal fiscal imbalances in a federation.

The principle of “one state one vote” is sacrosanct and inviolate and is also the norm in every civilised discourse. Even in the UN, every country has one vote. The taxation federation in Europe also works on this principle. If this principle is called into question, even for the sake of discussion, it would open the floodgates to the undoing of the force that binds this great country.

We should thus concentrate on carrying forward the glorious traditions of perhaps the only institution of co-operative federalism that we have been able to build so far.

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