When Gujarat under Modi, later under Anandiben Patel, called GST an "attack" on state financial autonomy
Even as the ruling NDA government has been charging the opposition, especially Congress, for seeking to roadblock implementation of the Goods and Services Tax (GST) across India, facts suggest, Narendra Modi as Gujarat chief minister, and later his successor, Anandiben Patel, taken strong exception GST till December 2014.
The Gujarat government made a written submission as late as December 11, 2014, seven months after Modi became Prime Minister, before the empowered committee of finance ministers. It opposed the 122nd Constitutional Amendment Bill introduced by Finance Ministe Arun Jaitley on three grounds:
- that GST Bill is an attack on fiscal autonomy of the state;
- that GST Bill will adverse impact state revenues, and the 122nd Constitutional Bill on GST brought by the Modi government does not address any of states’ concerns; and
- that the implementation of GST would cause severe loss to a manufacturing state like and affect the ‘Make-in-India programme’.
It stated, the new draft of the 122nd Constitutional Amendment Bill from the empowered committee failed to address “many of the concerns raised by the states have not been reflected in the draft”, adding, the states would “lose their fiscal autonomy”, in the same way as it happened after the introduction of the value added tax (VAT) in the place of sales tax.
Recalling that the Prime Minister had launched “the Make in India campaign”, the state government pointed towards how would Gujarat particularly lose: “In the GST regime, the abolition of central sales tax (CST) and the implementation of the destination principle would result in severe losses to manufacturing states that are also net exporting states.”
This was a continuation of what Narendra Modi as Gujarat chief minister had been saying between 2007 and 2014 to numerous empowered committee meetings of state finance ministers. In each of them, the state government opposed the constitutional amendment comprising GST Bill, describing it as against “the federal spirit of Constitution” as also the “rights of states to fiscal autonomy”.
On August 4, 2010, the state government said that the “constitutional amendment has come at a time when consensus is lacking even within the empowered committee”, as it “fundamentally alters powers of the states to levy and collect indirect taxes.”
It added, “The power to determine rate of taxes is a basic function of legislative body like Parliament or, as the case may be, State Legislature. Article 265 very clearly states that no tax shall be levied or collected except by authority of law. Thus, provisions of proposed Article 279A runs counter to the existing provisions of Constitution.”
Disagreeing with “wide-ranging powers given to GST council”, the Modi government asserted, “These powers shall remain within legislative and administrative purview of State and cannot be ceded to the council as it will take away entire financial autonomy of the State.”
On September 20, 2010, it said, the “Gujarat government does not support the proposed constitutional amendment in its present form”, as it would “destablise balance source of revenue and duties between Centre and States and would adversely affect the financial health of states and deprive them of a very important means of governance.”
On October 29, 2010, it said, “The constitutional amendment in the present format put forth by the Government of India is not acceptable to Gujarat.” On February 11, 2011, the it said that “the new constitutional amendment draft proposed by the Government of India is retrograde in nature and completely against the tenets of fiscal federalism.”
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