The biggest tax reform in decades - the national Goods and Services Tax or GST - has been thoroughly jeopardized by the centre’s abrupt demonetisation drive, said Amit Mitra on Wednesday. As the Finance Minister of West Bengal, Mitra is on the GST Council, which is drafting the rate and scope of the tax. He told a news channel that the April rollout of the tax seems unfeasible now and he will talk to other Finance Ministers about revisiting support for a reform seen as crucial for economic growth.
“After demonetisation, GST has become a double whammy for states,” said Mitra. The GST replaces a patchwork of central and state tariffs, creating a single market across the country. States are to be compensated for the next five years by the centre for the money they will lose from their taxes being removed.
However, Mitra said, the abrupt banning on November 8 of 500 and 1,000-rupee notes has already created an economic slowdown, so states are losing more money and sooner than planned.
“The government needs to redo its arithmetic,” he said, suggesting that the government’s April deadline for introducing GST now seems doubtful. He said the centre “should do GST at a time when it’s feasible,” adding, “I don’t see that at this time, as a student of economics.”
TMC chief Mamata Banerjee, has demanded the rollback of the notes ban, which the government has flatly ruled out. Mitra served earlier as the head of a special committee that fleshed out the contours of the GST. Now, the details of the tax are being worked out by the GST Council which brings together Finance Minister Arun Jaitley with his counterparts from states. It has resolved some key issues on how the sales tax would work and has approved draft rules for its collection.
Economists including former Prime Minister Manmohan Singh have said that economic growth is likely to shrink by at least 2 per cent on account of the notes ban.