Taking strong exception to the move in a letter to Union Finance Minister Arun Jaitley, Kerala’s Finance Minister Dr Thomas Isaac has pointed out that the 122nd Constitution Amendment Bill on ushering in the Goods and Services Tax regime, which has been cleared by the Rajya Sabha, marks a clear departure from the consensus reached at the meeting of the Empowered Committee of State Finance Ministers on key issues..

The bone of contention is the amendment to Clause 10 of the Bill which seeks to establish a new framework for distribution of central taxes. This will adversely affect the interests of the States, and hence Kerala’s strong protest over the move, Dr. Isaac’s letter said.

The consensus evolved at the Empowered Committee meeting was that all taxes would form part of the divisible pool and the states would also get their due. This has been compromised by the Bill cleared by the Rajya Sabha which confines the sharing of revenue to only certain areas. This, Dr. Isaac says, is clearly at odds with the consensus, and would not be as beneficial to the states as projected earlier.

What is significant is that the amended proposal never came up for discussion at the meeting of the Empowered Committee. Hence, it amounts to a clear U-turn on the part of the Centre, which militates against the spirit of cooperative federalism. That is the crux of Kerala’s argument.

Kerala and West Bengal are now pinning their hopes on the next meeting of the Empowered Committee of State Finance Ministers. If the meeting fails to address the concerns of Kerala and West Bengal, then it would result in a confrontation between the Centre and the States – a luxury the Centre cannot afford as it requires the cooperation of the states to ensure smooth implementation of the tax reform by April 1, 2017, the deadline set at present.

The development has cast a shadow on the high hopes of Kerala, a consumer state which stands to benefit immensely from the tax reform. Experts have it that implementation of the GST on the basis of the consensus evolved at the Empowered Committee meeting will fetch Kerala an additional annual tax receipts of Rs 3000-4000 crore.

However, the Centre’s bid to set up a new framework for sharing the revenue is threatening to dash the hopes of consumer states like Kerala,

The ball is now clearly in the court of the Empowered Committee which is expected to meet soon to solve the problem created by the Centre’s somersault on the tax reform. (IPA Service)