Once again, the effort to usher in the goods and services tax regime has proved inconclusive. The NDA government’s decision to call off the plan to hold a special session of Parliament in order to pass the GST bill effectively means that its introduction has been pushed by another financial year to April 2017 — seven years after its first deadline. The Narendra Modi government has accused the Congress of being obstructionist on the issue, and it may have reason to say so. By all accounts, by stalling the GST, a reform that it has advocated in the past, the Congress has won a pyrrhic victory. Yet, one and a half years into its tenure, the Modi government cannot deflect all the responsibility. The failure to push through the GST is essentially a statement of the BJP-led government’s inability to step up to the political challenge, deploy statecraft to get the Opposition on board, get past the hurdles posed by its tenuous numbers in the Rajya Sabha. The government has failed to either persuade a much-weakened Congress, or strike a bargain with it, or corner it on its evident double standard.
It is also true that there are still some outstanding niggles that have not been resolved on the GST. For instance, the provision of an additional levy of 1 per cent for the big producer states. On the face of it, this levy is another layer of compensation because the GST involves a shift from a producer-based tax to a consumption-based tax. What perhaps makes this an irritant for the Congress is the fact that it does not rule any of the big producer states, such as Gujarat and Maharashtra, which are likely to benefit. Yet, far from negotiating a compromise on this, the BJP has appeared clueless when faced with the query.
But by and large, it is a persisting irony that there is hardly another issue of economic policy on which such a strong consensus exists across the political spectrum. Apart from denting the prime minister’s can-reform image, the failure on GST also sends a sobering message to the business community in the country. The GST has the potential to raise the GDP by up to two percentage points. It will reduce business costs and ease transactions, thus improving productivity — the one thing India needs to ride out the current global economic slump. Moreover, as highlighted in the Economic Survey, higher revenue generation due to the GST has been an integral part of the Central government’s fiscal calculations.