Reach out

The cabinets approval of the draft of an amendment bill to the Constitution needed to bring into being the Goods and Services Tax means that it could,if all goes well,be introduced in Parliament during the current session. Given that the GST is one of the main planks indeed,perhaps the structural backbone of the reformist legislative agenda that the UPA outlined in the budget speech,it is good to know that its moving on it with some reasonable speed. A GST will simplify the tax structure and act almost like a silver bullet in increasing compliance,reducing transaction costs while relaxing the overall tax burden. Yet a tax on goods and services to be shared between the Centre and states was not envisioned when the Constitution was written,so bringing it into being requires a grand constitutional bargain,whereby states get to tax some things hitherto reserved for the Centre,and vice versa.

It will require,in real terms,some grand political bargaining. The hurdles are not small: after it is passed by both Houses with a two-thirds majority,50 per cent of states have to ratify it through a vote in their legislatures. The UPA can simply not command these numbers,and this amendment will need support across party lines. The opposition BJP,during its last general election campaign,had highlighted its commitment to the GST in its election manifesto. However,after that loss,it has dialled down its support considerably,claiming that some of its chief ministers believe it will significantly dilute states autonomy. To the extent these concerns are legitimate they will have to be taken on board. The Centre has already written three previous drafts which were used as bases for negotiation with states; the cabinet cleared only the fourth in this series.

The political spadework needed to ensure this amendment gets the numbers it needs is considerable. One sensible approach would be to ensure you have enough people,even within the opposition parties,coming out in support of the draft so that it will be easily evident what is a resolvable issue and what is being held up purely because of political obstructionism. The leader of the opposition in Lok Sabha,Sushma Swaraj,has said the BJP is willing to sit down and consult with the government over the draft thats going to be introduced in Parliament. The government cannot afford to be slack in taking her up on the offer.