A lot of euphoria has been generated around the recent momentum over the Goods and Services Tax (GST) and the anticipation that the bill will be passed during the monsoon session of Parliament. This followed a near consensus on the bill achieved at a meeting of the empowered group of state finance ministers at Kolkata, Tuesday.
The National Democratic Alliance government at the Centre is making its most determined efforts ever to pass the country’s greatest tax reform in the last one decade. It has tried to accommodate almost all demands pressed forward by the opposition and the state governments to ensure that the bill passes muster during the coming session.
nterestingly, cracks have surfaced in the Congress with regard to its stance on the GST bill. Its central leaders continue to insist on incorporating a cap on the rate in the constitution while Congress-ruled states do not mind its exclusion. Union finance minister Arun Jaitley must be complimented for being able to isolate the central leadership of the Congress party on this issue.
GST aims to integrate the country into a common market by removing barriers to trade in goods and services across states. The new law will subsume all indirect taxes of the Centre and states, including excise duty, value-added tax, service tax and octroi.
After the finance ministers’ meeting, Jaitley announced that all states except Tamil Nadu are on board with the desirability of GST and its implementation without further delay. He said Tamil Nadu has put forward a few suggestions and the empowered panel has been considering them. Given the equation of Jayalalithaa with Prime Minister Narendra Damodardass Modi, the former might not take long shedding her opposition to the bill. If all goes well, GST will be a reality before April 2017.
Having said this, it will be foolhardy at this point in time to assume that the move from here on before the passage of the constitution amendment bill will be downhill. There are still too many loose ends to be tied. First, it has to pass the Rajya Sabha hurdle where the ruling combine does not have a clear majority despite improvements notched up after the recent assembly polls. The Congress party, whose support for the bill is crucial for its eventual passage, is yet to come on board with the government on certain issues.
In fact, the Congress party does not want to give the GST credit to NDA on a platter even as it knows the bill’s passage will give a leg-up to country’s economic growth. The ruling party is in a minority in the Rajya Sabha with only 74 members in a house of 245. The Congress alliance partners Janata Dal (United) and Rashtriya Janata Dal together have 12 MPs in the upper house and they are agreeable to the bill.
The main opposition, which continues to insist on including a cap on the GST rate in the constitutional amendment bill, stands isolated on the issue. It rests with the government to co-opt the Congress party on GST. For a constitutional amendment bill to be passed, the bill needs to be passed in both houses of Parliament by a 2/3 majority besides agreement of half the states.
The second hurdle before the bill is that there has been no consensus on what the revenue-neutral rate will be under the GST so that states do not suffer losses in the new tax regime. This issue is likely to be resolved in the coming meeting of the empowered group of ministers next month. The Congress party will do well declaring its support for the bill. It should shed its opposition as it may not be able to hold back GST for long. If it continues to act as a hurdle, it may go against its electoral prospects.