GST Bill: Nitish Kumar’s googly on Congress shows way ahead for Modi govt

Nitish Kumar’s googly shows grouping of powerful regional satraps in favour of the GST that will further mount pressure on the Congress to fall in line

Dinesh Unnikrishnan July 20, 2016 11:05:19 IST
GST Bill: Nitish Kumar’s googly on Congress shows way ahead for Modi govt

Bihar Chief Minister and Janata Dal (United) chief Nitish Kumar met Union finance minister Arun Jaitley On Tuesday to pledge his support for the Goods and Services Tax (GST) Bill.

There is nothing surprising about Kumar’s promised support for GST really since JDU has been among the regional parties, which have hailed the big-ticket tax reform from the very beginning, even during the UPA government’s time.

JDU has maintained that GST is critical for the welfare of states and crucial to make India as a single market freeing from the current mess of several complex levies. But what one shouldn’t miss about the meeting is Kumar vehemently opposing the constitutional capping of 18 percent GST rate.

GST Bill Nitish Kumars googly on Congress shows way ahead for Modi govt

Nitish Kumar. PTI

"I do not support capping of the rate of tax,” said Kumar. This part is crucial since writing the GST rate in the constitution has been the sole major reason for the Congress, JDU’s ally in Bihar, for blocking the GST in the Upper House.

With JDU too pitching strongly against this demand, the Congress stands isolated and more vulnerable on the issue in the House. The Narendra Modi government has tasted the blood and will consult with more regional satraps in the approaching days to gain sufficient support.

In all probability, the decade-long GST puzzle is nearing a solution. To press the time value attached to the early passage of GST, Firstpost has been running a series of articles under the #SupportGST campaign in the recent weeks. In the series, most experts (economists, industrialists and academics have strongly argued why the passage of the Bill now is critical to make sure it gets rolled out from April, 2017.

This is because even after the Centre passes the amendment, state assemblies have to pass it separately and prepare the ground for its actual implementation. The reason the Congress party highlights to blackball the Bill ie the BJP opposed it when it was in the opposition shouldn’t be the reason to do the same now since much time has passed victimising the important reform to political bargaining.

If opposition parties keep dragging GST only to change their opinion when comes to power (which is what the BJP did too), the tax reform will never see light of the day. This will be detrimental to the larger interests of the economy. At the same time, the BJP shouldn‘t delay making a formal proposal to the Congress on how to address the demand that GST rate doesn’t shoot through the roof by proposing firm rules.

Probably, a provision can be made to empower the GST council to fix the revenue neutral rate. This will be acceptable to all since the council has representation from all states and Centre. The Congress has been fighting a losing battle from Day One on the issue of inclusion of the GST rate in the Bill. This is because if the rate (say 18 percent) is included in the Bill, in case of revenue loss in future, the government would find it difficult to adjust the rate. It needs to go through parliament and state assemblies. But, it is important to make sure the agreed GST rate is not too high, which will severely hurt the consumers.

In fact, the Arvind Subramanian panel had suggested a three-rate structure for GST implementation. A concessional rate of 12 percent for public goods that concerns the deprived or weaker sections, a standard rate of 17-18 percent that would concern majority of items and a rate of 40 percent for luxury items and tobacco, aerated drinks and pan masala etc.

This structure, if used, can balance the concerns of most segments. The reality is that GST is the only big reform that can happen at the current stage. The Land Acquisition Bill, another key reform, is off the table for some time as it has been diluted and has been left to the state governments to decide.

Thus state governments, including the Congress-ruled states, can never pass the blame to the Centre as far as land acquisition is concerned.

What is encouraging now is that the most powerful regional parties such as Mamata Banerjee’s Trinamool Congress have acknowledged the importance of the GST and have been urging both the BJP and Congress to work out a way looking at the issue beyond political bargaining.

“When the BJP was in the Opposition, they were stalling the GST. Now, the Congress is in the Opposition and they are stalling it. And all of us, the middle parties, except the Left, want the GST,” TMC leader Derek O’Brien said early this week.

"I urge the government and the Congress to get their acts together and pass GST in this Parliament Session. They are both to blame for this delay,” O’Brien said.

It’s not just the TMC, most other regional parties except perhaps Jayalaithaa’s All India Anna Dravida Munnetra Kazhagam, have made up their minds in favour of GST. Jayalalithaa isn’t decided which side to swing, but is likely to offer support after hard bargaining for the state.

Similarly, the Bahujan Samaj Party (BSP) supremo, Mayawati too has voiced her support for the Bill in the Rajya Sabha but with some conditions.

“Our party will give some suggestions when this bill will come up. Our party will support the bill with some suggestions," Maywati told reporters early this week.

The Samajwadi Party too have a favourable stand on GST. That leaves only the Congress and left parties out.

In the 245 member Upper House, the NDA needs two-third majority to pass the constitutional amendment. If it gains support of all regional parties (a difficult possibility) including the AIDMK and independent members, it might just win the number game, but that is a distant possibility. But, the Congress’ support is needed to pass the legislation in a meaningful manner.

Nitish Kumar’s googly shows grouping of powerful regional satraps in favour of the GST that will further mount pressure on the Congress to fall in line.

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