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After Bengal's Warning On GST, Finance Minister Arun Jaitley Gives Blunt Advice

For West Bengal, which has warned of cancelling its support to the huge tax reform of a national Goods and Services Tax or GST, Finance Minister Arun Jaitley offered this blunt advice: "If a state is seen as always being on the wrong side of every reform, then investors are going to be very wary of those states." The allusion to Bengal was clear at a time when it is aggressively wooing industry. Earlier this week, speaking to NDTV, Bengal's Finance Minister, Amit Mitra, said that the centre's shock ban of 500- and 1,000-rupee notes creates an unappetising "double whammy" to states already confronting a loss of revenue when GST replaces a pile of levies imposed by them. When asked if the centre had calculated the impact on states of "two big-bang reforms", the Finance Minister jested, "well, at least it is being acknowledged that we are bringing in a big bang reform...for two years, I have been asked where is the big bang reform?" He also stressed, "The Constitution does not permit a delay with GST" which has been cleared by parliament as law. The existing tax system is valid only for another year, the minister said. The government hopes to clear supporting legislation for the reform in this session of parliament. Mr Mitra, like his counterparts from other states, is a part of the decision-making body of the GST Council, which is finalising the rate and scope of the tax that will unify the country into a single market, making business much easier for manufacturers by removing taxes when goods move between states. Mr Mitra said that Prime Minister Narendra Modi's abrupt demonetisation drive has crunched the economy in states. This, he said, means states are losing money ahead of the introduction of GST, planned for April. Sates are to be compensated for the next five years by the centre for the money they will lose from their taxes being removed. But, Mr Mitra said, "The government needs to redo its arithmetic" now to factor in the hit states are taking on account of the notes ban. He said he will talk to other finance ministers to request them to reconsider their backing of the GST, seen as a mega reform imperative for economic growth.

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