When The GST Council Missed A Step

The carefully nurtured spirit of true federalism has been broken and it is not good for the country

- N Madhavan

At a time when India’s polity cannot be more divided, the Goods and Service Tax (GST) — despite its imperfections — showed that political maturity and the idea of consensus is, after all, not dead in the country. Political parties set aside their ideological and other differences and worked together to usher in India’s biggest indirect tax reform. This spirit of federalism was imbibed by the GST Council, the body that governs the tax. The Council, in its 37 meetings since the tax was rolled out in 2017, took all decisions unanimously. A consensual approach ensured that concerns of all States were addressed before a decision was made.

The 38th meeting of the GST Council that was held on December 18 broke this tradition. The Council resorted to a vote for the first time. It adopted a uniform GST rate of 28 per cent for a lottery, which saw 21 States voting for it while seven opposed it seeking a dual-rate. The significance of this development (lack of consensus) was not lost. “Every attempt was made to keep that set tradition [of decisions by consensus] alive... but eventually the Council was reminded that rules allow [voting] and that tradition was not part of the rule book and the rules should govern the running of the Council,” Finance Minister Nirmala Sitharaman explained after the meeting.

Former Finance Minister Arun Jaitley, if he were alive today, would have been very sad. It was he who, through his skills of persuasion, built this tradition of consensus carefully. He saw to it that the GST Council acted in the true spirit of federalism. At the same time, it will be unfair to lay all the blame on the current FM too. She inherited a sharply slowing economy, something that Jaitley did not have to deal with.