Why Modi, BJP and even some Congress CM opposed GST in the past?
GST is a tax which subsumes many state and central taxes. In effect, it reduces the power of states to tax their citizens. Hence it was essential that all the states and the centre were on the same page at every stage of the GST Act. This did not happen during the UPA rule. Expectedly, states were worried that they would lose a big pie of their revenue by getting into GST.
Even till the fag end of 2013, nearing the end of UPA’s tenure, along with BJP states, few Congress states and few other states with Non-Congress Non-BJP Governments, were opposed to certain provisions in the UPA’s version of GST. Till the last discussion of GST under UPA in November 2013, the states had some major demands:
1. Keeping Petroleum out of GST ambit
2. Keeping Alcohol out of GST ambit
3. Keeping Entry Tax out of GST ambit
4. Some sort of guarantee from Centre for potential revenue loss
The UPA could not negotiate with the states on the above demands and hence even after being 10 years in power, GST could not be brought under the UPA rule.
The new BJP Government was desperate to get GST rolled out as soon as possible. So, it decided to accept some of the states demands, and give them some comfort, so that they can agree with the centre at other places. Out of the above 4 demands, 3 were accepted, and a bonus benefit was passed on to the state:
1. Petroleum was kept out of GST
2. Alcohol was kept out of GST
3. A proposal was sent to law ministry to work out a “Constitutional Guarantee” to compensate states
4. And the Bonus: The power to states of levying additional 1% tax levy, for maximum 2 years, to help augment state revenues
In exchange for this, the Centre convinced the states to allow Entry Tax to be subsumed into the GST ambit. All this was achieved some time in late 2014, barely 6 months into the tenure of the new Government.