GST deadlock: Weight of directly elected house must always be maintained, says FM Jaitley


New Delhi: With the crucial GST Bill stuck in Rajya Sabha, Finance Minister Arun Jaitleytoday questioned the extent to which the Upper House can be used to block economic decision-making and said the “weight” of directly elected house must always be maintained.

Jaitley, who in May last year stated that Indian democracy faced a serious challenge with an ‘indirectly elected’ Upper House questioning the wisdom of ‘directly elected’ Lok Sabha, today said he will again be speaking to the Congress on the GST bill.

“To what extent our Upper House is going to be used to block economic decision making… In Australia the debate is on, the UK has gone through this debate a while ago and Italy is having the same debate. Because ultimately the weight of a directly elected House will always have to be maintained,” he said at a seminar here.

Opinion on a bicameral system of legislature world over has been sharply divided with some being of the opinion that a second chamber is essentially undemocratic as it can override the opinion of a directly elected House. Others however maintain that the Upper House provides for detailed scrutiny of bills which may have been rushed through in haste due to political compulsions by elected members.

The Goods and Services Tax bill, which seeks to replace a slew of central and state levies with a uniform GST rate, was passed by Lok Sabha in May and is pending ratification by Rajya Sabha, where the ruling NDA does not have a majority.

Congress is opposing the bill in the current form, demanding a cap on GST rate be included in the Constitution Amendment Bill.

“It is now coming down really to one issue. The only opponent to GST is the Congress party. Curiously, the party which had sponsored the law in first instance, has some belated wisdom that you must have a Constitutional cap. Now that seems a little difficult,” Jaitley said.

Finance Minister said he would be discussing the issue with the Congress in hope of getting the bill passed in the second half of Budget session, which begins on April 25.

“I am all for the idea of having a reasonable rate as far as GST is concerned which the GST Council will decide. But I hope with some consensus on that reasonable rate between two national parties, we are able to arrive at a more consensual approach,” he said.

The finance minister said stand on crucial economic legislations should not depend on where one sits in Parliament.

“For instance, I am faced with a reversal of position when I accept some of the moves which the Congress party itself started,” he said.

He said the idea of keeping corporate tax down to 25 per cent was included in the Direct Tax Code (DTC), which the then Finance Minister P Chidamabaram had mooted.

“GST was first mooted by Chidambaram and then introduced by the present President when he was finance minister and there is no point in taking a reversal as far as those issues are concerned,” he said.

On the Congress demand for capping the GST rate at 18 percent, he said, it is a fair stand but “whether you put it in the Constitution or (it is the) GST Council (of the states) who suggests that (rate).”

“I have no problem with the rate,” he said.

He added that there is now a demand to keep luxury items out of the proposed taxation system, which would mean that luxury items are subsidised by essential goods.

“I am then reminded of President Clinton’s comment on economy — you can’t create a situation where GST moves up into 20s by keeping luxury items and then say that now maintain it at 18 per cent,” he said.

Jaitley said there was a “greater need for a mature level of thought and discussions as far as these issues are concerned.”

This, he said, was not a problem specific to India. “As I travel around the world I see a lot of democracies having it.”

Asked whether he would term the reform initiatives as Big Bang, Jaitley said the government has taken a series of incremental reforms, which taken together are much more than Big Bang.

“I think this government is yet to commit its first mistake as far as the economic policies are concerned. All steps, which are taking place are in one direction and slowly and surely you are moving in that direction carrying the democratic opinion along with it,” he said.

“One of the great successes have been that today India doesn’t faces any political opposition to reforms, that’s because India is becoming more aspirational, people are feeling the benefit of reform process and carrying that section of opinion along with you, I think, is a big challenge which we have succeeded,” Jaitley said.

He said the government is dealing with stressed sectors separately and that will help clean up balance sheet of the banks.

“In next one or two quarters, balance sheet of steel companies will start looking better…. As global economy improves, you will start seeing impact on bank balance sheet,” he added.

He said bad loans of banks or NPAs occur mainly on account of two reasons — losses, which occur on account of business environment and second is loans which are given without adequate amount of due diligence.

Jaitley said there have been significant movements, which have taken place in infra sectors including power, oil and gas sectors. And government is trying to put resources in infra, agri sector and rural India where it is needed the maximum.

“You don’t have now to lobby with ministers for policy or for natural resources… So that’s a clean transparent that we have introduced,” he said.

As far as taxation, we have started to make India’s taxation globally competitive.

“On the individual taxation side we are are much better off than most developed parts of the world. Our rates are much more reasonable and attractive,” he said.

Jaitley said corporate tax also is being made as one of the attractive one in the world and work on rationalisation of direct taxes is on and in right direction.

On Indirect taxes, he said, the government is trying to make it reasonable once GST comes in.


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