Although it does not have the support of other opposition parties, the Congress has decided to go ahead and record its objections to the Goods and Services (Tax) Bill which was endorsed by the 21-member Rajya Sabha select committee on Monday.

Now that the report has been formally adopted, it will be submitted to the Rajya Sabha later this week.

While the Congress has appended a four-page dissent note, the Left parties are likely to follow suit. Members can send in their objections to the committee chairman Bhupendra Yadav by Tuesday afternoon.

The Congress party’s decision to submit a dissent note is not surprising as it had made it clear at the very outset that it would not support the legislation without the changes suggested by them being incorporated in the final draft of the legislation. The Congress, however found itself in a minority as most other opposition parties, including the Trinamool Congress, the Janata Dal(U) and the Samajwadi Party, were in favour of the Bill as they believed  states stood to benefit from the proposed tax regime.

The Congress move to break ranks with other opposition parties at this crucial juncture when they are planning a combined attack on the Modi government in Parliament flows from the belief that the ruling alliance cannot pass the legislation without its support.

The GST Bill is a Constitutional amendment Bill which requires the support of two-thirds of the members of each House. The National Democratic Alliance government is comfortably placed in the Lok Sabha but it could be in trouble in the Rajya Sabha where it is in a minority. The Congress can derail the passage of the Bill as it is the largest single bloc in the Upper House. And if it gets the support of the  Left parties, the government’s floor managers will  have a tough fight on their hands. The Congress effort will be to ensure that the government is not able to introduce the Bill because of the disorder in Parliament.

Eight specific points

The Congress dissent note is primarily based on the points raised by former Prime Minister Manmohan Singh at a meeting of Congress chief ministers last month.

The main opposition party has repeatedly argued that it is not opposed to the GST Bill as it was first introduced by the United Progressive Alliance government. However, it does not support the legislation in its present form as the NDA government has introduced several changes which are not agreeable to the Congress.

As a result, the Congress has recorded its objections to eight specific provisions in the Bill which include the proposal of allowing states to levy an additional one per cent additional tax as it would benefit only a few states like Gujarat and Maharashtra.

The Congress wants tobacco, alcohol and electricity supply to be covered under the GST Bill and the constitution of a GST Compensation Fund to be set under the supervision of the GST council to compensate states for the loss in their revenues. In addition, the Congress has proposed a ceiling of 18 per cent on the GST tax rate and a dispute settlement mechanism which had been provided for in the UPA’s version of  the Bill.

Full text of the Congress Note of Dissent
We are in favour of a Goods and Services Tax that is simple and comprehensive. The Constitution (122nd) Amendment Bill, 2015 is neither. It is pitted with compromises, exclusions and exceptions that make it impossible for us to extend our support to the Bill in the absence of the amendments we have proposed being incorporated in the Bill, as drafted at present.

First, to ensure that GST rates are moderate and reasonable and do not impose an unfair burden on consumers, particularly poor consumers, it is necessary that a ceiling rate be specified in Article 246A so that, in the pursuit of higher revenues, the GST Council desists from crossing the ceiling. We have proposed a ceiling of 18% as a reasonable, moderate, adequately revenue-generating GST rate.

Second, we find the proposal to levy an additional 1% tax to be market-distorting, especially in view of the fact that we have proposed 100% compensation for a minimum of five years to States that might lose revenues. Further, in our view, the compensation should be deposited in a GST Compensation Fund, under the administrative control of the GST Council, as proposed by he Standing Committee on Finance

Third, the single most crucial word in the Bill is “supply/ies", which is used in clause 9 and clause 18 without being defined. We have, therefore, sought to amend clause 9 through two provisos to article 269 (A) to clarify that goods moving from one unit to another unit of a firm in different States under the same ownership, or when two or more firms are collaborating in units located in different States for the manufacture of the same end-product, should be excluded from the term “supply/supplies”. This would also apply to the same term used in clause 18. However, representatives of the Government have failed to define this term in the Committee on the ground that three governmental committees are engaged in defining the term in preparing Bills fro GST, SGST and lGST. We believe that a Select Committee of the Rajya Sabha cannot be subordinated to bureaucratic committees and that it would not be proper for the Select Committee to commend a draft Constitution amendment to Parliament without a proper agreed definition of this key term.

Fourth, given that the fundamental aim of GST is to establish a common market for the whole country, we are unable to support a GST Bill that excludes indefinitely from the purview of the GST tobacco and tobacco products, alcohol for human consumption and electricity supply and consumption. We propose that all three be included in clause 12 of the Constitution amendment bill with the condition that the GST Council take a decision for their inclusion in GST within a period of five years.

Fifth, we cannot support a GST Council that is unduly weighted in favour of the Centre. In the interests of true “cooperative federalism", the share of the States in voting in the GST Council must be enhanced to 75% and the share of the Centre brought down to 25%.

Sixth, we cannot support a Bill that transgresses the elementary principle of law that parties to a dispute cannot be judges in their own cause. The failure to incorporate a GST Disputes Settlement Authority, as was provided for in the 2011 Bill, is a serious lacuna that must be filled. The GST Council, comprising members who will necessarily be party to any dispute relating to the implementation of GST, must be supplemented and reinforced with a GST Disputes Settlement Authority in toto as provided for in the 2011 Bill.

Seventh, the sources of revenue of the Panchayats and Municipalities, as provided for in Parts lX and lXA of the Constitution, must be safeguarded and they must be assured of their due share in the revenue buoyancy that is expected to arise from the enactment and implementation of the GST. It is only with such assurance, through the amendments we have suggested in this regard to the Bill, that we might find it possible to support the proposed legislation.

Eighth, special consideration might be given by the GST Council to any State or Union territory, with or without a Legislature, such as Goa and Puducherry, whose population does not exceed twenty lakh. Further, we strongly protest the failure to include in the Report of the Committee the detailed rationale for the various amendments we have moved to the Constitution (One Hundred and Twenty Second) Amendment Bill, 2015, while providing ample space for the Government to explain its rationale. Accordingly, we attach in the Annexe to this Note of Dissent the amendments we have moved to the draft Report of the Select Committee.

This Note of Dissent is submitted in view of the failure of the Select Committee to take our points adequately into account.