How Arun Jaitley used 'cooperative federalism' to checkmate Cong on GST

If the landmark Goods and Services Tax (GST) now stands on the cusp of frutition, the man who can claim almost exclusive credit for it is Arun Jaitley.

In his dogged pursuance to make GST enactment a reality, the Union Finance Minister refused to give up when going forward seemed impossible, shepherded the bill through a tricky terrain of varied regional interests and showed that cooperative federalism can trump even the most cynical of political strategies.

The last line needs a bit of explanation.

 How Arun Jaitley used cooperative federalism to checkmate Cong on GST

Arun Jaitley and Rahul Gandhi. PTI

The reason why Congress stands where it does now, isolated in its obduracy for not letting the bill pass with a demand (putting an 18 percent ceiling rate into the constitution) that has failed to find support in even its own states, is because Jaitley got his strategy right.

He understood more than anyone else in his cabinet that the way forward on GST would to be empower the states. From that point, over the last year since the opposition led by the Congress in Rajya Sabha on 12 May forced it to be referred to a 21-member select committee, the Union Finance Minister proceeded to brief, cajole and dangle the occasional carrot for regional forces where necessary and created a situation where the demand for a GST regime would be driven by the states, not just the Centre.

Jaitley's strategy to let the GST cudgel be taken up by the regional satraps who govern two-thirds of the country is a masterstroke with consequences that will far outlive the immediate cause.

Thwarted almost at birth after getting passed in Lok Sabha on 6 May last year, the GST had won majority support of the 21-member Rajya Sabha Select Committee, which on 22 July endorsed almost all the provisions while also agreeing to the demands of parties such as Trinamool Congress for a five-year compensation to loss-making states.

At that point, it seemed as if the government would be able to achieve its ambition of rolling out GST by 1 April, 2016. But Congress, of course, had other plans.

Still smarting from a historic drubbing at the Lok Sabha hustings, the Sonia Gandhi-led party couldn't have let Narendra Modi run away with the credit for implementing India's single-biggest tax reform which it had originally brought to the table in 2011. Constitution Amendment Bill needed two-third majority in Rajya Sabha and numbers were not on Modi's side. Congress, along with the Left parties and AIADMK submitted dissent notes.

Jaitley's challenge was twofold. One, he had to engineer a broad consensus between the ruling party and the regional forces through discussion and ensure a smooth passage for the bill and two, somehow isolate the Congress. It was obvious that taking grand old party along would be an almost impossible task because electoral setbacks had pushed it to such a corner that opposing legislative procedures was the only way for it to maintain some sort of relevance.

From then on, it became a game of chess. Jaitley's first move was to put political pressure on Congress.

"It is hardly a dissent note on the bill, it is a dissent against the Congress party's own proposals which were originally given. Congress MPs are giving a dissent against the suggestions made by their own chief ministers", Jaitley said in July last year while reacting to Congress's move. "If Congress opposes this bill, then the country will oppose Congress. Every citizen and trader in the country will oppose Congress" he said.

On the political front, the Trinamool Congress's ambiguity was over when the Centre acceded to its demand of full compensation for five years to make up for any short-term revenue loss. The Centre sent two cheques for about Rs 1,000 crore to West Bengal as compensation for Central sales tax.

The Left parties, which had submitted the dissent note on grounds that it may lead to sacrificing of financial autonomy and state-specific financial planning by governments could be negatively affected if it becomes law, seems to have been persuaded with Kerala’s Finance Minister Thomas Isaac attending the empowered committee meeting on GST in Kolkata recently. Though the CPM still retains minor concerns over the Centre's veto power in GST Council, it appears that coming to power in Kerala has cured it of its GST allergy.

So from a situation in May last year when Gandhi-led Congress, TMC, NCP had staged a walkout when government passed the bill in Lok Sabha (AIADMK and BJD also opposed its consideration but did not walk out) there is now the reality that the states understand the long-term benefits of the reform and have joined hands, leading Jaitley to claim after the meeting on Tuesday that "virtually every state has supported the idea of GST except Tamil Nadu, which has some reservation. It has offered a few suggestions, which have been noted".

And crucially, Jaitley claimed that there has been "complete consensus on no constitutional cap (the key demand on which Congress is still stuck) as exigencies may arise in future to revise the rates".

The Congress, increasingly left on its own with nary a partner to share its histrionics, now claim that to speak about GST now is premature as the Monsoon Session is one-and-a-half months away.

"Our (Congress) and other opposition parties’ demands should be considered and taken on board and then GST can be passed in two minutes. We don’t want to make this a big issue because nearly 1-1.5 months are still left for the session," said Leader of Opposition in Rajya Sabha Ghulam Nabi Azad.

While it may continue its bluster and insist on the government meeting its "three conditions", tragically for it even finance ministers of its own states, who attended the GST meeting in Kolkata, are not opposing GST and, instead, focusing on issues such as compensation to the states.

The isolation is its own doing. It had dashed government’s hopes for 1 April, 2016 rollout by opposing a special session of Parliament and tying it to a demand over Sushma Swaraj's resignation. It had, last August, blocked government's move for a debate on introduction of GST in Rajya Sabha by raising procedural issues.

It led Jaitley to utter that "The real purpose (of Congress) is to stall to stall the growth of the country and that is why session after session, they are using one pretext or the other to stall it. That is why they are using the pretext of External Affairs Minister. The Congress party does not want the economy to grow. They must candidly say so...They don't need any pretext."

Jaitley's outreach last November on willing to meeting top opposition leaders including Rahul Gandhi to resolve a parliamentary deadlock over GST, was also ignored. The Finance Minister took to Facebook after the washout of Winter Session and invoked Jawaharlal Nehru's legacy to remind the Congress leadership of the responsibility that comes with being lawmakers.

"Those who claim the legacy of Pandit ji must ask themselves the question, what kind of history are they making."

For plodding through the GST path with single-minded devotion, Jaitley deserves all the plaudits. As for Congress, it is doomed to carry on with its policy of obstructionism, come what may, as it is doomed to crash out of national consciousness with the "escape velocity of Jupiter".

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Updated Date: Jun 15, 2016 16:47:46 IST