Events put a question mark on the planned rollout of the GST by April 1, 2016
The Monsoon Session of Rajya Sabha ended before lunch on Thursday without the passage of the Goods and Services Tax (GST) Constitutional Amendment Bill, after opposition protests prevented the house from functioning every day of the three-week sitting.
The proposed Goods and Services Tax (GST) will subsume myriad federal and state tax levies, replacing a chaotic structure that inflates costs.
The delay in passing the law will make it difficult for Prime Minister Narendra Modi to meet a self-imposed deadline of next April for its launch.
The government is determined to implement the proposed goods and services tax (GST) from next April, finance minister Arun Jaiitley said hours after the latest session of parliament ended without approving the reform measure.
Arun Jaitley, however, said the government has still kept the option of reconvening the session to pass the bill.
“We have not taken any decision as yet as to when to prorogue the session,” he said.
The government has the option of calling a special sitting of parliament to pass the bill before the next scheduled session in the winter. But it would first need to strike a deal with the opposition Congress that is adamant in its demand for the resignation of three of Modi’s colleagues.
Shilan Shah, an economist with Capital Economics, said it would now be almost impossible to meet the deadline, and predicted a series of state elections over the next two years would make politically unpopular reforms harder.
“The bigger picture is that PM Modi has missed another major opportunity to push ahead with contentious reforms,” he wrote in a research note.The washout of the Monsoon session without passage of the GST bill in Rajya Sabha has sent a clear signal among investors that there is no consensus in Parliament on economic reforms, Assocham said.
“By not passing the GST Bill, we have missed such a big opportunity of aggregating the vast and diverse country into a single market sooner than later,” Assocham President Rana Kapoor said.
“With China slowing down, India is at the cusp of a bigger opportunity, which we should have grabbed. Unfortunately, political events of the last few weeks do not support the business environment,” Kapoor added.
The passage of GST bill would not just have helped the country move towards uniform tax regime but also sent a strong message that India is a place to be in for the global investors, the industry body said.
Supporters say GST will add up to two percentage points to economic growth and boost domestic trade.
“India’s political class is displaying a lack of maturity,” said M S Unnikrishnan, managing director at capital goods maker Thermax.
“This obstructionist politics is harming the country, blocking economic progress.”