Blocking the way

Congress’s position on the GST bill can hurt the economy and also isolate the party politically.

| Published: December 7, 2015 12:46 am
Prime Minister Narendra Modi speaking in Lok Sabha. Prime Minister Narendra Modi speaking in Lok Sabha.

The winter session of the Parliament began with much riding on it after the near washout of the monsoon session derailed the legislative agenda of the NDA government. The key pending reform is the Goods and Services Tax bill.

The GST would subsume all indirect taxes, unify the country as a single market, make it easier to do business, reduce black money, and rationalise exemptions that account for 2.5 per cent of the GDP. Two initiatives by the government demonstrated that it was willing to walk the extra mile to usher in the most ambitious indirect tax reform in the country. One, it agreed to the opposition demand of a discussion on the floor of the House on the intolerance issue.

Two, Prime Minister Narendra Modi, along with Finance Minister Arun Jaitley, reached out to Congress president Sonia Gandhi and former Prime Minister Manmohan Singh to iron out the remaining creases in the GST law. The Constitution (122nd Amendment) Bill, 2014 enabling GST is stuck in the Rajya Sabha, where the government does not enjoy a majority, after it was passed in the Lok Sabha last session. Last week, the recommendations of a panel led by Chief Economic Advisor Arvind Subramanian, further raised hopes of a breakthrough on GST. But statements by senior Congress leaders over the weekend suggest that the party is determined to continue playing obstructionist politics.

Before the session started there were three unresolved issues. The Congress objected to the imposition of 1 per cent inter-state levy. Two, it asked for a cap of 18 per cent for the GST rate in the Constitution. Three, it had a problem with the provision of a council of states, instead of judicial appellate body, to arbitrate over possible disputes. The CEA-led panel has recommended giving up the 1 per cent levy, and if accepted, this addresses the Congress demand. The constitutional cap is a patently absurd suggestion that will actually hurt the economy, as it will severely constrain any Central government’s ability to respond to demands for greater revenue collection at a later date. The third demand is best addressed through political consensus.

Barring the Congress, opposition parties are veering towards agreement on the GST bill, even if all issues are not settled to each political party’s satisfaction. Already, the BJD, NCP, JD-U and BSP have declared their unequivocal support for GST and have criticised the Congress for blocking the legislation. Yet, the Congress remains recalcitrant, saying such important legislation “cannot be rushed through” and insisting that it “cannot give a timeline” for a reform that was initiated, incidentally, by its own regime, and is already late by six years. The Congress should realise that its obstructionism on the GST not only hurts the economy but also isolates the party politically.

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