24 Feb 2016

Professor M Govinda Rao, public finance expert and a visiting professor at the Centre for Economic Policy and Public Finance, on Wednesday delivered a lecture at ADRI. He spoke on ‘GST implementation and its implications for Bihar'. Professor Rao is also a member of the 14th Finance Commission of India.

Dr Shaibal Gupta, member-secretary of ADRI, welcomed guests on the occasion and Ms Sujata Chaturvedi, IAS, commissioner (commercial taxes), presided over the programme. Speaking at length, Professor Rao said: "the GST reform has been on the agenda of the Union and States for considerable period of time.  This is an important reform which is considered necessary and important to make the tax system efficient and bring in efficiency gains by ensuring full input tax credit, impart export competitiveness and ensure a common market throughout the federation.  It would however, be premature to consider the reform as a game changer, for, ultimately the gains will depend on the how the structure of the tax will evolve.  With 29 States, 2 Union territories and the Union government involved in negotiations, compromises are unavoidable and flawless GST may not be difficult, but it is important to get the fundamentals of the reform correct."

He added: "The most important step in implementing the reform is the constitutional amendment and on this consensus has eluded.  The main opposition party has demanded three important modifications in the Bill.  First, it wants the one per cent tax on inter-state sale should be dropped. Second, it wants the tax rate should be capped in the constitutional Amendment and third, it wants the dispute resolution mechanism should be specified in the Amendment.  While there is merit in the first for, the tax on inter-state sale goes against the grain of GST, the other two objections do not have merit.  The rate structure cannot be cast in stone because constitutional amendment if not feasible every time the rate needs to be changed.  Similarly, evolving the dispute resolution mechanism should be left to the GST Council.  Hopefully all the parties will see reason and get the Bill passed in the Rajya Sabha in the Budget session. Once that is done there is considerable work to be done by the GST Council and hopefully, it will undertake a systematic action plan to implement the reform by April 2017."  

On the issue of revenue neutral rate, Professor Rao said "the report of the Committee headed by the Chief Economic Adviser is not very convincing.  Irrespective of the estimate of the revenue neutral and the standard rate, the best thing for the Union Government is to determine the maximum rate at 18 per cent and go ahead.  Hopefully, the states like Bihar will stand to gain from this reform as we move away from a partially origin based tax to the destination based levy, but the state will have to do considerable work to make it a success and gain significant revenues."

Ms Chaturvedi in her address said that officers should try being techno-savvy in this information age.  

Mr Bijendra Prasad Yadav, energy and commercial tax minister, government of Bihar, Mr Abdul Bari Siddiqui, finance minister, government of Bihar, and Shri Sushil Modi, Leader of Opposition, Bihar Assembly, were present on the occasion. Mr Rameshwar Singh, Mr Arun Kumar Mishra, Dr Sunita Lall, Dr Nandini Mehta, Mr Satyajeet Kumar Singh, Mr KPS Keshri, Mr Sanjay Goenka were also present on the occasion. 

Professor Prabhat P Ghosh, director of ADRI, paid the vote of thanks.       
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