Employee Today

Wednesday, 28 June 2017

7th Pay Commission: Will GST roll out further delay allowances for central government employees? - Business Today

Even as the country gears for the biggest tax reform with the roll out of the GST, the central government employees will be waiting for decision on a concern of their own - allowances under the 7th Pay Commission. The long pending matter has led to frustration among the central government employees who want a final decision on revised allowances - including the most important House Rent Allowance (HRA) - so that the change starts reflecting in their salaries. It remains to be seen if the issue of the 7th Pay Commission and the allowance structure find a place in the cabinet's agenda when it meets later today. Central government employees would be more hopeful this week as Finance Minister Arun Jaitley reportedly discussed the matter with Prime Minister Narendra Modi before both leaders left for their respective foreign visits. They are now back in the country - Jaitley from Russia and PM Modi from his three-nation tour, which included the US.

There have been repeated delays on the issue due to the Prime Minister and the Finance Minister's absence owing to official foreign visits. The first Cabinet meeting this month on June 7 was cancelled as PM Modi was out of India on a four-nation trip. The second meeting on June 14 had no mention of allowances because FM Jaitley was away on a trip to South Korea to attend the Asian Infrastructure Investment Meeting. However, it is believed Modi, in his meeting with Jaitley, has instructed to finalise allowance rates without delay. While the expectations have risen for a final decision on the allowances issue, the clamour around GST can play a spoilsport.


The Parliament is holding a special session at midnight on June 30th to roll out the GST. It is certain the cabinet's focus at the moment is on ensuring a smooth transition from the current tax system to the new one under the GST. Does it mean that the cabinet will further defer the decision on allowances? We do not know yet. But if the cabinet does so, then the decision on allowances could only take place in the next cabinet meeting the coming week. In which case, central government employees may have to keep their fingers crossed.

Government employees had protested the recommendations of the Seventh Pay Commission, following which the Narendra Modi-government formed a Committee on Allowances under Finance Secretary Ashok Lavasa to review the suggestions. It was constituted in July and after an extended deadline was asked to submit its report to the government by February 22, 2017. The review report was finally submitted in April this year.

The report was then forwarded to the Empowered Committee for consideration and consolidation which, in turn, submitted it to Jaitley. He is now expected to present the same before the Cabinet for the final nod. In its deliberations, the Empowered Committee of Secretaries (E-CoS) capped HRA rates between 25 per cent and 27 per cent. The Cabinet may approve higher rates than this on demands from the central government employees. Even if not, their paycheck will see a decent increase owing to the hike in basic pay in accordance to the 7th Pay Commission.

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