Last week when Prime Minister Narendra Modi met Congress president Sonia Gandhi and former Prime Minister Dr Manmohan Singh at his 7, Race Course Road residence, no one said that the political impasse on the controversial Goods and Services Tax or GST Bill had ended.
But no one denied that the first-ever conversation at the highest level finally broke the ice between the government and the principal opposition party, holding out some hope of an agreement .
But six days after the meeting, that hope seems to be evaporating. Replaced by a whisper – “the GST may not be passed in this winter session and the budget session may be the new goal post.”
The reasons for this are not merely the differences over what shape the final GST bill should take. They are political.
Sources in the Congress, which conceived the one-tax-for-India measure, say the party is grappling with a generation divide over GST. On the one side elders like Dr Singh favour passing the bill and warn that stalling it would project the party as “obstructionist.”
But the youth brigade led by party vice-president Rahul Gandhi is challenging them, a senior former minister said. “I am for the bill, but the youth brigade and Mr Gandhi are firm that the BJP stalled the bill from 2011 to 2013 and the Congress cannot make things easy for the BJP government now.”
Speaking to the leaders on the two sides of the divide in the Congress is insightful. The Sonia-PM meeting was not merely the first structured meet between the two. It had more to it. I saw it as the PM putting behind him the bluster of having won an election and invited Mrs Gandhi, who on the other hand moved past the wounds of a stinging defeat in the national election last year to accept the invite.
The two post poll psyches have been instrumental in creating ground for ugly combats between the two main parties derailing parliament since July 2014.
But the dynamics in the Congress are changing. Rahul Gandhi calls the shots, most of them. He is charting a future for the party that he is in the throes of inheriting. And in the process setting the stage for a Modi vs Rahul battle for future.
Past commitments matter less to him and his group of young Congressmen. And helping PM Modi pass a landmark legislation and walk away looking good is a complete no no. The government’s retreat on the land acquisition bill and the BJP’s Bihar debacle has provided a political energy drink to this group.
The young turks are flagging the need for caution – that the GST is perhaps the last big “must do” item on the NDA government’s list, as the land bill is more or less consigned to cold storage for now. Once passed the bill is passed the government will not really need the Congress and the reconciliatory tones toward the party will disappear.
The “Congress-mukt or Congress-free Bharat” agenda of the BJP is on hold for items like the GST to be clinched. Once done, the BJP will re-engage the aggression gear. The truce is for short-term support not long-term peace,” said a young Congress MP.
Another Congressman said, “Ex finance minister P Chidambaram may be for the bill but is not for making things easy for the government. The BJP frustrated his attempts to pass bills for years. There is no harm in the BJP squirming for some time. ”
The group’s intent is indicated best Rahul Gandhi’s political move on Tuesday.
Concluding a debate on B R Ambedkar’s role in drafting the Indian Constitution in the Rajya Sabha, PM Modi was conciliatory. He praised Jawaharlal Nehru and said, “We have to look for reasons for uniting people…keep promoting unity and harmony.”
Speaking at the same time in the Lok Sabha in a debate on “intolerance”, Rahul Gandhi yielded not an inch. He questioned the PM’s “silence” on occasions when controversial remarks were made by BJP ministers and leaders. He tore into the government asking the Prime Minister whether he would “stand by and watch as his colleagues trample the voice of this country.”
The two very different tones indicated that the Sonia-Modi meet was not a truce, but a flag meeting of generals during hostilities. At the meet, the Congress only assured the government that it would consult party members, saying there was still a lot of time and sittings left in the winter session, which ends on December 23.
The Congress president is in the US right now for a health check and may be back by Friday.
The government is aware of what’s happening in the Congress but there is little it can do. It chose a Sonia-Modi meet instead of a Rahul-Modi meet.
It has also been taking to smaller players in the Rajya Sabha to get their support on GST in the house, where it is in a minority. As a result the Janata Dal United, BSP, Trinamool Congress and NCP are on board supporting the GST. Over the next few days, the government will use this consensus to isolate and pressure the Congress. The numbers in the Rajya Sabha are such that the Congress has to blink if GST has to be passed.
On the face of it, the main opposition party and the government are going through the motions to keep the hope of passing GST alive. Over the last 10 days the government has indicated that it is not averse to the Congress’ first demand – to drop the 1 per cent additional origin tax proposed to help manufacturing states make up the losses they may incur due to GST, which is a destination tax.
To tackle demand two – putting a cap on GST – a committee headed by the government’s chief economic advisor Arvind Subramanian has been preparing a report that could be out this week. Mr Subramanian has left for the US to spend time with his family.
Sources in the finance ministry say many working models are under scrutiny for a GST rate which is the lowest possible to arrive at a revenue neutral situation – which means ensuring that the new tax fetches the same amount of revenue as all the older taxes being subsumed into GST were bringing.
Instead of one fixed GST rate, the government is exploring the possibility of going for a “tax band,” which can start at a low of 18 per cent and a high of 24 pc.
This would help the government meet yet another demand of the Congress. The party wants the GST rate to be mentioned in the constitutional amendment. A fixed rate in the constitutional amendment will make any change in the future a long and tedious process. The government of the day would have to move a constitutional amendment and get it ratified by half of India’s states. A tax band would mean that any GST rate within it can be implemented.
But insiders on both sides admit that India has had to wait since 2011 for its biggest tax reform not because the bills had flaws in them or for a lack of consensus, but simply because the battle is political not numerical.
(Rahul Shrivastava is Senior Editor, Political Affairs NDTV 24×7)
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