It's high time Congress party rethinks its GST stance. Here's why - Firstpost
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It's high time Congress party rethinks its GST stance. Here's why


The blame game between the Congress party and Bhartiya Janata Party (BJP) over who is blocking the Goods and Services Tax (GST) Bill entered yet another round over the weekend. This time, the verbal attacks were led by former finance minister P Chidambaram from the Congress side and Union minister for Urban development and Parliamentary affairs Venkaiah Naidu from the BJP camp.

Both accused each other for failing the passage of the crucial tax legislation in the Winter session. Chidambaram attacked the ‘stubborn and unbending attitude’ of the Congress.

“The government was outright dismissive, until the Chief Economic Adviser (CEA) virtually endorsed two of the three principal objections and made no recommendation on the third,” Chidambaram said.

M Venkaiah Naidu (left) and P Chidambaram. PTI file photo

M Venkaiah Naidu (left) and P Chidambaram. PTI file photo

Chidambaram was referring to the CEA panel recommendation to do away with the 1 percent origin-based tax on interstate sale of goods and suggestion for a standard GST rate of 17-18 percent. “Yet, the government has not been able to find a way to accommodate the views of the Opposition and pass the GST Bill,” Chidambaram said. The Congress also wants an independent dispute resolution mechanism and the inclusion of the standard GST rate in the constitution itself.

Responding to Chidambaram’s comments, Naidu retaliated that Congress was ‘dodgy’ on the issue and was playing as per its ‘script’.

"The Congress party steadfastly refused from its pre-winter session script of not allowing GST Bill to be passed comes what may. As per the script, they were dodgy on this important issue. I did not expect this from a party that ruled the country for most of the time since Independence," Naidu said. If needed, the BJP is willing to hold a special session of Parliament, he added. Separately, finance minister Arun Jaitley said he is hopeful of pushing the Bill in the Budget session.

BJP’s missed opportunity

The fact is that the BJP had expressed the hope to pass GST in the run up to the previous two Parliament sessions (monsoon and winter) as well. But it failed miserably to make any meaningful progress, despite the CEA panel opening up a chance to resolve the deadlock.

The fact is that the country has been denied the benefit of the biggest reform at least in a decade till now on account of political roadblocks. If the GST plan is faced with such a delay and is on the verge of missing the much-hyped April 1 deadline, both the BJP and Congress are equally responsible. For now, the ball is clearly in the Congress’ court.

True, the BJP missed an important opportunity to smartly use the Arvind Subramanian panel report to its advantage during the Winter session, when the panel made critical recommendations on GST that perfectly aligned with at least one of the major demands of Congress - doing away with the 1 percent interstate trade levy - and left enough headroom to make headway on the second demand — on the standard GST rate.

This was right opportunity for the BJP to force the Congress back to the discussion table and work out a consensus. It’s not too late even now.

The third demand, the creation of an independent dispute resolution mechanism, is anyway not perceived as a major hurdle by anyone since even the Congress-ruled states do not seem to have an opposition for this.

Chidambaram’s allegation that the BJP didn’t return with an official response to opposition after Prime Minister Narendra Modi promised to do so almost a month back, should be noted. This suggests lack of enthusiasm on the part of the BJP to push the plan in the discussions when the session was still on.

A compromise by the BJP in the backdrop of the CEA panel recommendations would not have been interpreted as its political defeat to the Congress by any sane political analyst or television anchor, but something it did in the larger interest of the economy.

Congress’s demand

The Congress party’s stubbornness in demanding the GST rate to be included in the constitution makes no sense in the current context, when the BJP is in-principle agreeing to two of the three demands. Naidu has already left enough hints about the BJP’s readiness to accommodate the Congress’ two demands for the GST roll out.

“The Congress has put forth three suggestions. We are for two suggestions but can’t agree with the first one, which wants the rate of taxation under GST to be made part of the Constitution,” Naidu said.

“This is difficult as during disaster the country has to go in for additional cess every now and then to ensure that relief measures are undertaken. Then you have to amend Constitution every now and then,” Naidu said. In this, Naidu is bang on.

Inclusion of the standard tax rate in the Bill is risky since only the House can tweak it no matter how urgent is the situation. Amending a critical constitutional Bill whenever the rate needs to be tweaked is not a feasible plan and shouldn’t be left to Parliament to decide. What if the same rate was applied to Income Tax rates or sale tax rates?

Clearly, this demand cannot be a convincing one for the Congress party to block the Bill. If the Congress harps on this point endlessly, it would also be a bad political strategy that could boomerang sooner or later.

GST, an important reform that could change India to a global market and, thus, push up its GDP growth by a few notches has already been delayed considerably. This wouldn’t augur well for the economy, seen as the only bright spot among the emerging markets, and has the potential to rise to the leadership role among these economies in Asian region.

Once the Bill is passed in Parliament, it has to still go through the state assemblies. States are unlikely to show reluctance if the government goes with the CEA panel recommendations, which has proposed 100 per cent for states for first five years for any likely revenue loss.

The short point is this: In the current context, where the BJP is seemingly agreeing to two out of three demands of the Congress on GST, the Congress party should rethink its stance on the GST Bill, considering the merits it can bring to the economy, and support its passage.

First Published On : Jan 4, 2016 16:46 IST

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