State finance ministers on yet another GST ‘study’ tour

Even as the Goods and Services Tax (GST) legislation is in the final stages of preparation, the empowered committee of state finance ministers is on a week long trip to Australia to study the implementation of the tax there. This is the second visit of the committee to Australia. The group of 30 visited Sydney on September 27 and is now en route to Canberra, before heading home on Sunday.

The high-powered committee has made eight study trips abroad, on many occasions visiting more than one country, since it started deliberations on the path-breaking tax reform.

Last year, the committee made a nine-day trip to Beijing and Shanghai in September. Russia, too, was on the cards but it was omitted at the last minute. The first trip of the committee was in 2006 to the UK, Canada and Italy, for 11 days. Subsequently, the committee headed by then West Bengal finance minister Asim Dasgupta visited Australia and Singapore in May 2007 and Brazil and the UK in August of the same year. France, Belgium, Spain and Luxembourg were part of an 11-day trip in 2011. This was followed by a 15-day tour of Canada and Japan in September 2012 and 12 days in South Africa in July 2013.

“On this trip, since the clearance came in very late, not all finance ministers and representatives were able to make it,” said a government source. Only 13 representatives, including of Delhi, Maharashtra, Kerala, West Bengal, Uttar Pradesh, Andhra Pradesh and even Tamil Nadu, which opposes the tax, are in Australia. The state finance ministers are accompanied by finance secretaries and a staff member.

Chairman of the committee K M Mani has not made it to Australia, but member-secretary Satish Chandra and another official of the secretariat are part of the delegation.

State finance ministers on yet another GST 'study' tour

During their three-day stay in Sydney, the delegation met New South Wales Premier Mike Baird and visited the Parliament of New South Wales.

Sources described the discussions with the Australian counterparts and officials as successful.

Tax expert Satya Poddar said the Australian model held valuable lessons for India. “The debate in India for the past eight years has been about who decides the tax rates and who holds veto power. The implementation of the tax hinges on coordination between the Centre and the states. The federal models of Canada and Australia are two routes that can be adopted.”

However, unlike Canada where the federal government imposes the tax and it is optional for provinces to adopt it, in Australia the federal government imposes a national tax, administers it and distributes the entire revenue among the provinces.

Fractious relations between the Centre and the states have marked the history of deliberations on the goods and services tax in the committee, just as friction between the government and the Opposition marked the passage of the constitutional amendment for the rollout of the tax.

The National Democratic Alliance government is keen to implement the tax by April 1, 2016, but is hampered by opposition from the Congress.