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Miffed Mamta's U-turn on GST may influence non-BJP states negatively

Sulagna Sengupta & Neeraj Thakur | Updated on: 11 February 2017, 6:41 IST

The meeting between states' finance ministers and the Central government's officials, including finance minister Arun Jaitley, on 14 June, this year, had laid the foundation for the passage of Goods and Services Tax (GST) in Rajya Sabha in the Monsoon Session this year.

Those in the know of things suggest that Bengal's finance minister Amit Mitra, in the capacity of chairman of the Empowered Committee of State Finance Ministers, played a major role in convincing the other states to agree on the idea of passing the GST bill at the earliest.

Prior to that, a lot of states, including West Bengal, had reservations about the loss of revenue due to the implementation of GST.

Post that meeting, the NDA government got the confidence to introduce the Constitutional Amendment Bill in the Rajya Sabha with the mechanism of compensating states for any loss of revenue in first five years of the implementation of GST.

Also read: Govt panel accepts most Congress demands. Will the GST bill pass now?

The bill was passed in the Rajya Sabha with an overwhelming support of 203 votes.

Change of stance

But on Monday (29 August) the Bengal government dropped a bomb on the Central government's hope of getting the GST bill ratified by 50% of the states within 30 days.

So far, fourteen states including Delhi, Assam, Bihar and Jharkhand have ratified the legislation.

Also read: GST: How Chidambaram invoked the 'aam aadmi' to corner Jaitley

Although Mamata Banerjee said on Monday that "paucity of time" and not politics had prompted her government to drop the GST bill from the agenda of the one-day special assembly session, senior TMC leaders have said that Mamata is annoyed after Centre tried to break the co-operative federalism of the state and so she now wants to see how the non-BJP states deal with the GST Bill ?

Even though, two non-BJP states have already ratified the GST bill, backing out by the Bengal government can create doubts in the minds of other non-BJP states' chief ministers.

And this can lead to further trouble for the central government in meeting the deadline of implementing GST by April 2017.

Miffed Mamata

While the Bengal government has not offered any reason for the deferment of ratification of the GST, sources say that Mamta is unhappy with the Centre for sending ten officers to Nabanna (the state secretariat) without any "official communication" for the integration of state treasury with the Public Financial Management System (PFMS).

None of these officials were allowed to enter the state treasury as the CM called it a "serious infringement" of the federal structure.

GST gives immense power to the central government in terms of the collection of revenue and its distribution to state governments and most state governments with regional parties in power have been fearing the centralisation of powers with the Centre after the implementation of the GST.

It took the India more than a decade to convince all political parties in the country that GST will not lead to centralisation of financial powers, but Mamta's anger over the central government's move can turn the tide in the opposite direction.

Also read: Can't make sense of the GST debate? Here's what you need to know

Here are some of the Centre's notifications that irked Mamata Banerjee -

  1. Linking the state treasury with the central system. "Tracking of expenditure is important as a monitoring tool. Hence, the Public Financial Management System would be suitably integrated with the state treasuries in 2016-17," said a circular sent out by the central government.
  2. "NITI Aayog shall take up monitoring and independent evaluation of important centrally-sponsored schemes, especially as there is a need to transit from monitoring expenditure to monitoring outcome. These arrangements have come into force in the current year 2016-17, adds the circular.
  3. Another Central notification further said that the states have to 'compulsorily' participate in core schemes and have to bear 40% of its costs.
  4. Centre has withdrawn its financial support from 39 major schemes and also scaled back its share in 58 welfare schemes.

It may be noted that previously Mamata dubbed the GST Bill as a 'positive tax proposal', and reportedly instructed Amit Mitra to ensure its smooth passage.

Some political analysts feel that a U-turn on the GST Bill could also be a ploy to put pressure on the Centre to restructure West Bengal's outstanding debt, which is around reported to be around Rs 3.05 lakh crore for 2015-16.

Whatever may be the reason for Mamta's change of mind on the issue of ratification of GST, the Centre must act fast to get Bengal government's support to ensure implementation of GST from next year.

Edited by Jhinuk Sen

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First published: 30 August 2016, 9:48 IST