GST off the table for now: NDA


Bill will not come up in the winter session; BJP blames Congress for blocking passage, plans nationwide campaign

New Delhi: The National Democratic Alliance (NDA) government on Wednesday signalled that the goods and services tax (GST) is off the table for now, admitting a setback to its reform agenda, but also putting the onus on the Congress, which has blocked the passage of the bill.

A person familiar with the development made it clear that the constitutional amendment bill will definitely not come up in the remaining period of the winter session and that the Bharatiya Janata Party-led (BJP-led) NDA is not clear when it will come up during the budget session.

In response, the Congress claimed that it was not just it that is opposed to the legislation in its present form.

“GST is our bill and we support the legislation. We have put forward some demands and we want the government to accept it in order to get our support. It is not just the Congress party but there are other parties which too have certain concerns and the government must speak to all the opposition parties. Talks are going on, two rounds of discussions have already happened with the government,” a senior leader of the Congress said, speaking on condition of anonymity.

The Congress is the original author of the GST bill, which is being taken forward by the NDA government. Apart from the Congress, Tamil Nadu chief minister J. Jayalalithaa-led All India Anna Dravida Munnetra Kazhagam (AIADMK) and the Left parties have vehemently opposed the bill.

“The Congress is not allowing Parliament to function so it is difficult to start a discussion on GST bill,” a senior minister in the NDA government. This person, who asked not to be identified, added that the government’s emissaries have met the leadership of the Congress twice but in vain.

NDA has a total strength of 63 MPs in the Rajya Sabha whereas it needs at least 163 out of the total 245 MPs to support the constitutional amendment bill.

The Congress, the AIADMK and the Left parties together have 89 MPs in the Rajya Sabha. The Janata Dal (United) and the Rashtriya Janata Dal (RJD) have 13 MPs. Bihar chief minister Nitish Kumar has made it clear to the government that his party supports the GST bill but that the government should get support of the Congress first.

Meanwhile, the BJP is drawing up plans to start a nationwide campaign against the Congress for blocking crucial legislation, including GST and real estate bills, in the winter session.

“We are making plans to start a pan-India campaign against the Congress. The party has stalled development work by not letting Parliament to function. It has not allowed any discussion in Rajya Sabha because of the National Herald case. Instead of fighting the National Herald case in court, Congress party is stalling Parliament. People are worried about the development work and BJP wants to give voice to the concerns of the people,” said a senior BJP leader.

Interestingly, the shift in strategy of the NDA came on a day finance minister Arun Jaitley signalled partial acceptance of the list of demands put up by the Congress, including scrapping of the proposed 1% additional tax levy under the GST regime.

Jaitley said that final revenue-neutral GST rate would be less than 18%, which implicitly accepts the second Congress precondition that the rate should be capped at that level. The finance minister, however, rejected the demand that the rate be included in the constitutional amendment bill.

While the finance minister’s remarks do narrow the gap between the government’s position and the Congress’s, it is not clear whether this will be enough to end the stalemate—particularly because fresh political differences have cropped up between the Congress and the BJP.

“I am willing to concede that the 1% additional tax, which was put because manufacturing states insisted, is possibly a fair arguable point. I have told my friends in Parliament that I am ready to go back to those manufacturing states and tell them that we have guaranteed you to make good for all the loss suffered in the first five years. So this 1% additional levy issue is resolvable,” Jaitley said.

He was addressing industry lobby groups and trade bodies on GST.

On the issue of capping the GST rate in the constitution amendment bill itself, Jaitley said: “Are tariffs part of Constitution? Can tariffs ever be cast in stone? Suppose there is a drought or a flood in 10 states and for one week you need to raise the tariffs, are you then going to amend the Constitution?” he asked.

A report submitted by a panel under chief economic adviser Arvind Subramanian earlier this month had proposed a standard rate of 17-18% and also recommended doing away with the 1% distortionary tax.

Expressing disappointment at the way the Congress has been stalling Parliament and not allowing the passage of important bills, Jaitley further said that if the trend continues, future governments will have to look at alternative ways to conduct government business.

“If by sheer noise and disturbance, session after session of Parliament is not going to function, then it will set precedents for all opposition in future. We will enter this phase where legislative activity will become more and more difficult. Government business in future will have to take place essentially through executive action and money bills,” Jaitley said. “Those who are setting this precedent should realize that this will also be a part of the history of parliamentary democracy,” he said.

He insisted that the numbers in the Rajya Sabha are favourable for GST. Come April, these numbers will become even more favourable, he said. He was referring to fresh elections that will take place in April to fill seats that will fall vacant in the upper House. The NDA is hopeful that it will be able to increase its presence in the Rajya Sabha in the next couple of years.

Subramanian provided the economic justification to transition to the new regime, considered to be the most important tax reform initiative.

“GST will provide a buoyant source of revenue not only in the short term but over a medium term. At a time when the fiscal situation is challenging, GST will be crucial,” he said. “The self-policing nature of GST will increase compliance and reduce corruption,” he said, adding that this tax reform, along with steps taken by the government such as the roadmap for phasing out corporate tax exemptions, will give India a “clean, efficient, modern, broad-based taxation system”.

GST is expected to remove barriers across states and unite the country into a common market. It will subsume all indirect taxes like excise and value-added tax and make it much more easier to do business in India.

Industry and trade lobby groups urged political parties to support the constitution amendment bill in the current winter session to ensure implementation of GST at the earliest. They stressed that GST will be crucial to catapult India on the global centre stage at a time when most global economies are struggling.

“GST will ensure that traders will be easily able to do business. Traders have to pay multiple taxes and are subject to unfair demands by corrupt tax department officials,” said Praveen Khandelwal, secretary general, Confederation of All India Traders, representing around 60 million traders.

“This bill should not be delayed further. If the opposition continues to stall this reform measure, we will not be hesitant to take to the streets to protest against the unnecessary delay,” he added.

“We cannot allow best to be the enemy of the good,” said Sumit Mazumder, president, Confederation of Indian Industry, referring to the need for an ideal GST but the need for compromise on some major issues to get states on board for the implementation of GST at the earliest.


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