The Bharatiya Janata Party (BJP) will have to cajole parties such as Biju Janata Dal, YSR Congress, Telangana Rashtra Samiti, All India Anna Dravida Munnetra Kazhagam (AIADMK) to clear a decision in the GST (goods and services tax) Council, if the voting takes place.
Voting in the council does not seem far-fetched now after a division had to be resorted to for deciding GST rates on lotteries at the December 18 meeting.
The Council never had to resort to voting to decide an issue before that. In fact, the provision for voting under the GST law was seen as a matter of an academic interest before that meeting.
“Once the voting option has been exercised, there appear to be much more chances of voting getting repeated for controversial issues such as reduced rate of compensation to states,’ said Abhishek Rastogi, partner at Khaitan & Co.
M S Mani, partner at Deloitte India, said it will be better if decisions in the council meetings are taken with the consensus of all states, as has been the practice in the past.
For any decision to be passed, at least 75 per cent of those present and voting must back it. Under normal circumstances, when each of the states and the Centre vote on an issue, the Union government can block the decision. Alternatively, if 12 states combine, they, too, can block a decision.
The Centre needs the support of 19 states to get decisions through.
The balance of forces remains with the Centre as it accounts for a third of votes, with the states forming the remaining share. This ensures that even if all the states combine, they cannot convert a decision into law, as they will fall short of the requisite 75 per cent threshold.
Given that there are 30 states and union territories with legislatures, each state has 2.22 per cent of the voting power, irrespective of size. This means Uttar Pradesh and Goa enjoy the same percentage of voting power, despite having a huge variation in their populations.
Now, juxtapose this voting structure to the reducing number of states that BJP or its allies rule. The National Democratic Alliance rules in 15 of the 29 states, with one – Jammu and Kashmir— under President’s rule. If one considers parties friendly to the BJP, such as YSR Congress, TRS, BJD and AIADMK, the BJP will have 21 states with it.
This means that it can pass any decision, provided it is able to woo these parties to support it.
The controversial issue of the GST rate on lotteries was decided by voting, when the council met on December 18. Most of the votes were in favour of a uniform tax rate of 28 per cent on both state and private lotteries, with effect from March 1, 2020. The result was a partial defeat for the proposal by Kerala Finance Minister Thomas Isaac, on whose insistence the voting was conducted.
At present, there are dual rates for lotteries — 12 per cent tax on state-run lotteries and 28 per cent on state-authorised private lotteries. Voting happened twice on the issue. The first time it was a toss up between a uniform rate and a dual rate. Seventeen states and the Centre are learnt to have voted for a single rate and seven for dual rates.
Maharashtra, which was earlier for a uniform rate, voted for a dual rate last time. Then there was voting on whether the rate should be 18 per cent or 28 per cent on lotteries. All voted for 28 per cent.
Kerala had favoured a dual rate for the two kinds of lotteries. Isaac had said if it came to a uniform rate, then that for private lotteries should not be lowered to 18 per cent, but the rate for government-run lotteries should be raised to 28 per cent.
Nirmala Sitharaman, Union finance minister and the chair of the Council, tried to play down the differences. “It (voting) was not imposed by the council. It was not imposed by me as the chair. It was on the insistence of one member,” she asserted.
It isn’t as if all decisions sailed through smoothly in earlier meetings. Before the GST was introduced from July 1, 2017, there were huge differences within the council over the rate structure, powers of the state and the Central officials, among other things. These got accentuated after demonetisation in November, 2016, sources said.
However, former finance minister Arun Jaitley was able to evolve a consensus on contentious matters and iron out differences. This might be tricky now, particularly if contentious issues such as lowering the revenue growth for the purpose of compensation to loss-making states come to the council.
Source: Business Standard
