The countdown for the historic Goods and Services Tax (GST) passage in the Rajya Sabha begins today, literally. If the crucial constitutional amendment has to happen, it will happen in the next 10 days as the monsoon session is scheduled to end on 12 August. Even if one assumes positive outcome, it is only the beginning of a long process to rewrite India’s convoluted tax regime keeping the April 2017 deadline (already delayed by one year). There is a lengthy, complex process involving state governments that will follow before the actual roll out takes place. Hence each remaining day in this session is critical to watch.
It wouldn’t be an exaggeration to say that the Narendra Modi government can kiss goodbye to the GST dream in this term of NDA government if it fails to pass the Bill in the ongoing session. Why?
Skip this session, and comes winter, when the war cries will be heard for the crucial state elections scheduled for the next year. No one will be keen to group together for the tax reform at that point. Look further to 2017-18, the GST passage will be even more difficult since the incumbent will be preparing ground for the next general elections in 2019 and the Congress-led opposition will be fighting hard to win back power using all weapons to attack the Modi government. The Congress party wouldn’t want to concede defeat on GST with 2019 elections at the door-step. No room for the business of lawmaking then.
At the time of filing this, the GST amendment is not listed in the business of the Upper House for today (1 August) and even tomorrow (2 August).
There has never been a better conducive environment for the passage of GST in the last eight years since the idea was first introduced by former finance minister P Chidambaram in the 2006-2007 budget. There is an all-party consensus for the amendment. Most of the regional parties, except the AIADMK is on board.
The Congress, which has been opposing the Bill demanding the inclusion of the GST rate in the constitution seem to have diluted its stance to settle for the rate to be mentioned in the law. It has also agreed to allot five hours of the house time to debate the Bill, signaling willingness to initiate the process.
One needs to only fear negative surprises. Are there any?
Over the weekend, a controversy has erupted after defence minister Manohar Parrikar’s comment on those acting against the interest of nation and allegedly on actor Aamir Khan in this context. The minister didn’t take any names. But his reference to an actor’s comment on growing intolerance climate in the country that even prompted his wife to ponder over the prospects of leaving the country, is obviously on Aamir and has stirred a controversy.
“One actor had said that his wife wants to live out of India. It was an arrogant statement. If I am poor and my house is small, but I have to love my house and always dream to make a bungalow out of it,” Parrikar had said.
Parriakr also mentioned that when Khan made the statement last year, people, while protesting his views, started uninstalling the online trading app, he was advertising for and the firm too pulled out the advertisement involving the actor.
Also launching an oblique attack on JNUSU president Kanhaiya Kumar against the backdrop of alleged raising of anti-national slogans at Jawaharlal Nehru University earlier this year, Parrikar had said, “Such people who speak against the country need to be taught a lesson by the people of this country.”
Congress vice-president Rahul Gandhi has wasted no time to jump on Parrikar’s remarks saying, when he tweeted “RSS & Parrikarji want to teach everyone a lesson. Here’s a lesson for you: hate is the preserve of the coward and it never wins.”
Parrikar later clarified that he didn’t take anybody’s name. “I had said that people who don’t respect the country should be opposed. I am opposed to ‘upadrav’ (unrest). Such people should be opposed in a democratic manner. To oppose, seminars should be held,” Parrikar said
Then there is the raging issue of atrocities against Dalits in Gujarat and the excesses of cow-vigilante group. On Sunday, Dalits rallied in Ahmedabad reflecting their anger against the oppression and attacks. Whether Gandhi and his friends will translate these issues to shake the floor and drag the GST passage, one needs to wait and watch.
In the past few weeks, considerable progress has been made on solving the GST code between centre and states. The government has agreed to drop the 1 percent inter state levy and fully compensate the states for any possibly losses. According to this Economic Times report, the state governments have also raised a demand for right to assess taxes of companies with turn over of over Rs 1.5 crore on a three year rotation basis so that the issue of duplication of taxes doesn’t arise.
Already, there is an agreement to leave the control of smaller taxpayers (those less than Rs 1.5 crore turn over) to states. What is not decided yet is the issue of what should be the ideal GST rate. The consensuses currently seem to be around 18-19 percent. Too low a rate will break the back of manufacturing states although the government has said that it will compensate them in the initial years. Too high rate will severely hurt the service industry and consumers directly.
The GST Council, which will likely be the authority to take a call on the rates, will thus have to find a middle path. The passage of the amendment cannot be seen as a won battle. It’s the first step in the direction of the major tax reform India has ever seen. There is a lot of work left for the final rollout even after that. That is why the Congress’ support is crucial for the government not just for the passage of the Bill, even after that.
Though the Congress has come down substantially from its earlier position, it hasn’t given the final word yet. The wind can still turn either side. “The problem is that Jaitley wants to divide the opposition and wants to corner others. They are delaying the matter. Our leaders are ready to pass the bill,” Congress leader Mallikarjun Kharge said on Monday. The remaining ten days of Parliament will surely have the characteristics of high suspense. If indeed the NDA manage to pass the GST test India will join the 160 plus list of countries that have implemented the advanced tax reform.