Union Finance Minister, Arun Jaitley’s meeting today (Monday), with state finance ministers on the passage of Goods and Services Tax (GST) is crucial for the BJP to iron out the remaining differences with the Congress party, but doesn't seem to be the last hurdle in the race. This is because, over the weekend, the political course in the capital has seemingly taken a turn and bad politics yet again seem to trample good economics.
The reference here is to the Enforcement Direct (ED) notice to former Haryana Chief Minister Bhupinder Singh Hooda and others on allotment of a plot in Panchkula to Associate Journals Limited (AJL), the publisher of The National Herald newspaper, which the Congress has termed as yet another instance of political witch-hunting.
One wouldn't know for sure if there is political motive behind the ED action on Hooda. But, what we know is such an advance on the National Herald case, when a crucial Parliament session is on and when the BJP is literally desperate to get Congress on board on the GST issue, is the perfect recipe to kill hopes of any ‘productive’ outcome left in the Monsoon Session. The ED clampdown on Hooda will hurt the Gandhis more than Hooda himself. And anything that hurts the Gandhi-family makes the Congress party blind to everything else, including the GST Bill. This can spoil whatever progress the Congress party has made in the negotiations so far.
The Congress has already tasted blood on this issue. "I don’t think the Prime Minister and his government are sincere about any constructive cooperation. They are continuing on a path of political targeting, vendetta and consultations," Congress deputy leader in Rajya Sabha Anand Sharma was quoted as saying by The Indian Express. "And in this vitiated environment, there is no cooperation possible between the Congress and the government," Sharma said. The message is clear. Congress senses a weapon in the Hooda-National Herald issue against the BJP-camp akin to what Agusta was in the last session, may be even worse. It will do the job of a spoiler in the GST party.
Also, one must remember, this issue has come when the politically sensitive issue of atrocities against Dalit is already hot on the plate. In this backdrop, even if Jaitley manages to build a consensus on the three demands of Congress (capping the GST rate in the constitution, one percent interstate state levy and dispute resolution mechanism) and address the concerns of state governments like Tamil Nadu including the issue of compensating states once the GST rate is implemented, the fate of the Bill remain uncertain due to the sudden change in the political climate.
Till the end of last week, things appeared to turn conducive on the GST front. This was because of the three demands put forward by the Congress party, the BJP had virtually agreed in principle to two—waiving off the one percent inter-state levy and the creation of dispute resolution mechanism and large consensus among the non-congress, non-left parties on the absence of logic in capping the GST rate in the constitution. Also, a majority of the regional parties have agreed to the passage of GST. The government’s proposal to share the powers on tax collection with states too made the proposal attractive for them.
Even the Congress party, realizing it is more or less isolated now on the GST issue, was beginning to come down on the issue of capping the rate in the constitution saying it is willing to agree if the provision to ensure the rate doesn’t go up sharply is written down as a rule in the Bill. In Monday’s meeting Jaitley is expected to discuss this issue further. There is confusion with respect to the wide variation of the revenue neutral rate of GST between what has been proposed by the Arvind Subramanian panel (15-15.5 percent) and what has been proposed by the National Institute for Public Finance and Policy (27 percent).
But, none of these are issues that can’t be sorted out through a discussion at the GST council meeting. The real issue, as mentioned earlier, is politics now not economics. No matter what the BJP-camp thinks, the Congress party continues to be a formidable force in the Upper House. The side is rejuvenated after the Uttarkhand and Arunachal episodes and now equipped with the Dalit, National Herald episodes to take on the BJP in the Upper House. That’s a tough challenge for Prime Minister Narendra Modi to deal with as he strives to achieve the GST dream. The Congress had earlier agreed for a five-hour debate in the House signaling its positive stance. If Jaitley manages to build consensus and iron out differences in today’s meeting with states on contentious issues, the GST test might happen in the Rajya Sabha as early as this week.
But, the current wave of National Herald and Dalit issue carry the potential to capsize the GST boat.