Good for states tax

State governments are not expected to cede their revenue space. Closer to ground realities, they are bound to have better planning acumen than the Central bureaucracy that tends to see India as a less complex entity than it really is. So, the position taken by the empowered group of state finance ministers (EG) that the proposed structural reform of the indirect tax system should not result in any decline in their current revenues or income growth potential is entirely valid. So long as the states are not merely quibbling, the Centre should pay heed.

However, EG's recent statements on the structure of the Goods & Services Tax (GST) feed the impression that it is guided solely by self-interest. Only a mellowing down of EG would ensure that the proposed destination-based tax on consumption won't be shorn of its chief merits—avoidance of tax cascades and maximum reduction of multiplicity of indirect taxes. There's no reason for the states to pitch hard for a less comprehensive GST and an undue amount of freedom to decide the tax rates for various goods and services. They have anyway been given the unambiguous assurance that any revenue loss on account of GST would be compensated for. The Thirteenth Finance Commission is also seized of the matter.