Jinxed GST Bill faces fresh political hurdles

The prospects of early passage of the Goods and Services Tax Bill appeared to fade on Monday, given renewed opposition from the Congress, the sharpening of political discord among the BJP, the BSP and the SP in the run-up to the Uttar Pradesh elections and the lingering differences between the Centre and the States, which are likely headed for a showdown at a meeting scheduled for Tuesday.

On Monday, the Congress, which opposes the GST Bill in its current form, said it would not allow any government business in the Rajya Sabha in the ongoing Monsoon Session, which effectively seals the fate of the Bill. The Congress’ stand came in response to the BJP’s disruption of the vote on a private member’s Bill to provide special status for Andhra Pradesh.

Party spokesperson Jairam Ramesh categorically said the Congress would not cooperate with the government till the issue of special status was resolved.

“It looks like the GST Bill may have to wait till the next Budget Session,” said a senior Congress leader.

Sharpening political differences between the BJP and the BSP over the lynching of Dalits in Gujarat and the name-calling of Mayawati by a BJP leader have created fresh problems for the passage of the GST Bill.

Likewise, even the Samajwadi Party, which had come out in support of the Bill, may now not want to be seen to be voting alongside the BJP in the run-up to the February 2017 Assembly elections in the State.The party has been forced on the defensive by a BSP campaign claiming that the BJP and the SP had a “tacit understanding”.

The Congress hardened its position following the NDA members’ disruption of proceedings on Friday, when the Andhra Pradesh Reorganisation (Amendment) Bill was about to be voted. The Congress also alleged that the BJP was playing “vindictive politics” –– a reference to the Enforcement Directorate’s decision to file a case against former Haryana Chief Minister Bhupender Singh Hooda over an alleged land deal.

Jairam Ramesh said that “internal issues” within the BJP were the real reason why the GST Bill was getting stuck. “If they are so confident of passing the Bill, why don’t they bring it to the Rajya Sabha? The real reason is that a section of BJP leaders feel that the GST will be inflationary. If a cap of 18 per cent is not built into the Constitution, GST will be inflationary,” Ramesh said.

Minister of State of Finance Arjun Ram Meghwal said the government would take a call on when to list the Bill for discussion in the Rajya Sabha after the meeting of Union Finance Minister Arun Jaitley with the Empowered Committee of State Finance Ministers on Tuesday. Jaitley’s meeting with his counterparts from various States to discuss the GST Bill is likely to witness a showdown given the differences that prevail on issues such as the revenue-neutral rate (RNR) and administrative control over small businesses.

Tuesday’s meeting, which is a follow-up to the recent conference of the Empowered Committee of State Finance Ministers on GST in Kolkata, will discuss the sticking points and the redrafting of some elements of the Constitution Amendment Bill, including the provision for an additional 1 per cent tax on inter-State supply of goods.

The States have argued that the rate of taxation under GST should be “fair” to them and not necessarily be “revenue-neutral”.

“Over the past few years, there have been a number of reports and studies on the revenue-neutral rate for GST, each suggesting a different rate. The rate should ideally be about 20 per cent,” said a State Finance Minister who did not wish to be named.

At the meeting on Tuesday, Chief Economic Adviser to the Finance Ministry Arvind Subramanian will make a presentation on the RNRs. The States have questioned the wide variations in RNRs, or the rate at which there will be no loss or gain to the States under the GST regime. While Subramanian had recommended an RNR of 15-15.5 per cent, the National Institute of Public Finance and Policy had suggested 27 per cent.

Meanwhile, a proposal by the Union Finance Ministry for dual administrative control over businesses with a turnover of less than ₹1.5 lakh has also raised the hackles of a number of States.

“None of the States will favour dual control, as it will impact States’ power over collection of taxes at the local level, though it may be a business-friendly move,” said another State Finance Minister.

The Centre, which has come around to dropping the additional 1 per cent tax on inter-State supply of goods, is likely to propose that this provision be redrafted. Sources said most manufacturing States are on board on the issue, provided they are adequately compensated.