Finance ministry wants veto in GST council

The Union finance ministry is seeking veto power in the proposed council of finance ministers on the goods and services tax (GST).

This is necessary, it has told the Union law ministry, to ensure the states do not combine to force a decision against the central interest. The  law ministry has the job of drafting a constitutional amendment on the subject which is acceptable to all, Centre and states.

The central government's idea is to create the council as a disciplinary body whose decision will be binding on all, so that none deviates from the GST regime. Its proposal, yet to be agreed to, is that the body get constitutional backing. An approval from a majority of states (possibly a two-third majority) would be required for changing the agreed principles of GST. This has been proposed as a way out to accommodate states' fears of the GST resulting in their ceding the constitutional powers they have on tax matters. The move is being presented as a way of ensuring the Centre cannot force its views on the states.

'The Centre is different'

However, the Union finance ministry has the opposite fear, of states joining to force the Centre's hands. It has noted that the central government would be represented by only the finance minister on the proposed body.

"What would the Centre do if states get together and suggest something not in our interest? All we want is that on the matters related to central taxes, the finance minister should have a right to reject a proposal of the states. It will be like a veto only to stop changes, not to adopt those," said a finance ministry official, on condition of anonymity.

Another said the proposed power may not be termed a 'veto', to avoid the negative connotation for states. "There should be a consensus. If states are proposing something and the Centre does not agree to it, that means there is no consensus and a proposal should not move forward, and vice versa," he said.

Some states, on the other hand, are opposed to the proposal. Madhya Pradesh and Tamil Nadu have already strongly opposed the idea in their discussions with the finance ministry.

And, other states --Kerala is one--are opposing the concept of the council altogether. They want the current system of having an empowered committee of finance ministers to continue. "As of now, we are happy with the empowered committee of state finance ministers. This forum has worked well. Officials of the finance ministry are present in the empowered committee's meetings. There is no need to have another council," said Thomas Isaac, finance minister of Kerala.