Why Chidambaram dropped hints that GST Bill is not a done deal yet

Hold the celebrations, put the bubbly back in the bottle and the mithai back in the box. The Goods and Services Tax Amendment Bill may have come up for discussion in Rajya Sabha on Wednesday, but it may still take some time and lots of haggling to meet the April Fool's Day deadline.

Blame the usual suspect: The main Opposition party. In the past it was the BJP and now it happens to be the Congress. Necessity is the mother of all submissions. And the Congress knows this. After blocking the GST Bill for almost years, just like the BJP had earlier, a few months ago the Congress realised that its strategy would henceforth yield diminishing returns.

File image of P Chidambaram. PTI

File image of P Chidambaram. PTI

One, the consensus within the Rajya Sabha was evolving in favour of the Bill. The Congress camp's erstwhile partners in blocking the tax reforms were slowly being co-opted by the NDA. And two, states were getting increasingly vocal on the need for passing the Bill that promises to create a seamless national market and increase tax collections.

Seeing the tide turn in favour of GST, the Congress threw in the towel. It decided to support the Constitution Amendment that will pave the way for the passage of the GST Bill in Rajya Sabha.

So, is the GST a done deal now?

To understand the Congress' stand on GST, one needs to get the political perspective of the Bill. Twelve years ago, when the idea of a unified value added tax was mooted in parliament, the BJP blocked it under various pretexts. But the root cause was the fear that the Congress will gain from the expected and anticipated growth in GDP because of the tax reforms. Now, the Congress is guided by the same fear.

By supporting the Bill in Rajya Sabha, the Congress made a virtue of its political isolation. But if the arguments proferred by its speakers are an indication, the Congress will try to delay GST for as long as possible. It will aim to block the bill till a time where the gains from its implementation will not help the BJP in the 2019 elections.

Opening the debate for the party, former finance minister P Chidambaram dropped clear hints that the GST story still has many twists and turns left. And he sold the party's opposition as the greater public good.

Chidambaram argued that the Centre's refusal to commit to a 18 percent cap on tax will lead to high inflation. He said the BJP is leaving the option of tinkering the tax rate with the Executive and in some cases it may go up to 24-26 percent. "We will take this issue to the people," he warned.

Chidambaram pointed out that the idea of capping the tax rate was mentioned in the chief economic advisor's report and thus the Congress was justified in insisting on it.

"The empowered committee is the one which arrived at a 15.5 percent revenue neutral rate and came to the conclusion that 18 percent should be the appropriate GST rate. The Congress did not suggest the 18 percent rate; 18 percent came out of your report," he said.

With a sly smile he then dropped another hint: without mentioning the tax rate, no Bill can be expected to pass judicial scrutiny. Thus indicating a legal fight may follow a political debate if the Congress' demand is ignored.

There you go then, hear his speech again, read the lines and between them, and realise that the GST will face several hurdles in its bid to meet the April Fool's Day — as Derek O'Brien said — deadline.

"The current Bill is just an enabling amendment to the Constitution. The two actual Bills will then have to be passed to become law. Much give and take will take place and lots of preparation would be required. It will take some time. Abhi Dilli dur ast," says public policy expert and columnist Mohan Guruswamy.

GST has to pass many tests. First, Parliament will have to pass legislation on central GST (CGST) and Integrated GST (IGST). Then, the state GST Acts will have to be passed by all the 29 states and nine 9 Union Territories. After that the Centre and the states will have to settle on a suitable date of implementation.

The Congress has thrown the 18 per cent cap as a spanner in the works. And the Opposition has foreclosed the option of the government passing GST as a money bill.

Fresh battle lines are being drawn, escape routes are being closed.

Chidambaram said GST stands for Good Sense Triumphs. O'Brien said it stands for Go Slow Tactics.

Guess who got it right?

Updated Date: Aug 03, 2016 19:10 PM

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