It’s high time we revisited GST, says Thomas Isaac

‘Lack of flexibility for States is against spirit of Constitution’

Former Finance Minister T.M. Thomas Isaac said it was “high time that we revisited the Goods and Services Tax (GST)“ to allow more flexibility for States, including room for the States to modify their rates. He told The Hindu on Wednesday that the flexibility for the States would not affect either the Central GST or inter-State rates. He pointed out that Kerala has had a flood cess, which had run smoothly. He also said that the States, as of now under GST, did not have any flexibility on fixing rates.

He said that the tax system should be revenue-neutral with luxury items being taxed higher than other essential commodities. A tax system being revenue-neutral means that the changes in tax laws would not affect the volume of revenue earned by the government.

Another key point he raised was that the Central compensation period for the States should be extended to another five years to help the States because the volume of tax revenue grows fast as the economy grows.

There is also discontent among States regarding the functioning of the GST Council and these issues should be taken up and addressed by the Centre, said Mr. Isaac, who was two-time Finance Minister of the State, member of the State Planning Board and a professor at the Centre for Development Studies, Thiruvananthapuram. He also said that the lack of flexibility for the States was against the spirit of the Constitution.

He cited the recent Supreme Court of India verdict that the GST Council's recommendations would not be binding on the States. The court ruling should pave the way for discussions on various GST issues between the Centre and States, he added.