GST Bill in Rajya Sabha: Behind Arun Jaitley-Chidambaram bonhomie divisions are deep

From the first two speeches in the debate around the Goods and Services Tax (GST) Bill introduced in the Rajya Sabha on Wednesday, one thing became instantly clear: the aggressive name-calling and political finger-pointing between the Bharatiya Janata Party and the Congress party may have got a temporary reprieve, but the intense haggling over the provisions of the GST regime is going to continue.

Former Union finance minister and Congress leader P Chidambaram with Union Finance Minister Arun Jaitley. PTI

Former Union finance minister and Congress leader P Chidambaram with Union Finance Minister Arun Jaitley. PTI

Finance Minister Arun Jaitley gave the first official hint about the thaw over the GST Bill when he told a television channel, hours before introducing the Bill in the Rajya Sabha, that the Congress was never principally against the GST. He followed it up shortly by thanking the Congress and acknowledging that the GST Bill was originally a Congress baby while introducing the Bill.

Former finance minister P Chidambaram, who was the first to speak from the Congress benches, started by thanking Jaitley for the friendly tone set by the ruling party "in the last two weeks" and said his party hoped that the Constitution (122nd) Amendment Bill will be passed by the House after the debate indicating clearly that his party would not stand between the country and its most important indirect tax reform.

Thus, on the face of it, conciliation seemed to be the mood of the House. But Chidambaram’s speech did indicate that, even if the Bill is passed by the Rajya Sabha, as indeed it might, the GST debate will just get postponed, not settled.

Chidambaram spoke for most part about the GST rate. All this while the Congress party insisted that the GST rate should be capped at 18 percent. It also wanted that this rate be mentioned in the Constitution Amendment Bill so that no government could increase it by a mere executive order. The Bill introduced by Jaitley on Wednesday does not mention the GST rate so to that extent the Congress has yielded.

But, Chidambaram pointed out, that does not mean the Congress has given up the demand either for capping the GST rate at 18 percent or for enshrining it in the law. This will come up again, Chidambaram said, when "three months later you will have to come back to the House to pass the Integrated GST Bill". (Today, Rajya Sabha is debating the GST Constitutional Amendment Bill that introduces the concept of an all-encompassing pan-India indirect tax. It will empower the Centre and the states to levy GST. This amendment will pave the way for the Integrated GST law that will have to be passed by Parliament setting out the details of the GST regime, rates and how the revenue will be shared between the Centre and the states.)

At that time, Chidambaram almost taunted Jaitley, the government will have to inscribe the GST rate into the law because "no tax bill will stand legal scrutiny if it does not mention the rate of taxation".

Defending his party’s stand that the GST rate must be set at 18 percent, Chidambaram said they did not pluck the 18 percent out of thin air. "We got it from the report of the chief economic advisor to this government."

Chidambaram painted a scary picture of a future government hiking the GST rate to 23 or 24 percent and warned that it is too risky an inflationary tool to leave in the hands of the executive without having to go through the legislature.

So it is clear that the Congress is still pretty set on two things that it has always wanted: one, the rate should not be more than 18 percent and, two, it should be mentioned in the law so that it cannot be tinkered with at executive whim. It was apparent though that the Congress has made two concessions maybe because it was under political and public pressure not to stop an important reform.

The first is to let the Constitution Amendment Bill go through without hitch and to slightly dilute its position on the rate. While earlier the Congress was arguing for a 'cap' on the GST rate at 18 percent, Chidambaram was consistently talking about "standard rate". That is, while it earlier wanted a freeze on the rate so that future governments can’t increase the rate, it is now willing to consider a base rate which may be changed but only through the legislature, not the executive.

But the sting was in the tail. For all the apparent mood of conciliation, Chidambaram cleverly foreclosed an option for the Narendra Modi government to pass the Integrated GST Bill. Extending all cooperation for passing the Bill at hand, Chidambaram sought an assurance from Jaitley that the government would not resort to a legislative sleight of hand to pass the Integrated GST Bill.

"Hopefully after this debate, the Constitution Amendment Bill will be passed," Chidambaram said. "But we need an assurance from the government that when the bring the GST Bill they will bring it as a finance bill, not a money bill. If we have that assurance, we will help pass this Bill," he said.

This is important. The states do not want the 18 percent standard rate to be mentioned in the law. The Congress is insisting. So, if the Constitution Amendment Bill is passed today, the NDA government might have been tempted to bring the Integrated GST Bill as a money bill. A money bill can become law if passed by the Lok Sabha whereas a finance bill has to be passed by both the Lok Sabha (where the government has the numeric strength) and the Rajya Sabha (where the government doesn’t have the numbers).

The Modi government used this trick to outwit the Congress by introducing the Aadhaar Bill as a money bill. By insisting that the Congress will pass the GST Constitution Amendment Bill only if Jaitley assures the House that the future bill will be brought to the Rajya Sabha, Chidambaram has forced Jaitley’s hands. If Jaitley does not give the assurance Congress might still hold out on the current bill and if he does give the assurance, he might end up where he began on the debate over some of the crucial provisions of the GST regime.

So even if the Constitutional Amendment Bill is passed today, it’s not over till it is over. The GST fight, it seems, has just been deferred by a few months.

Updated Date: Aug 03, 2016 18:04 PM

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