THE constitutional amendment that paves the way for the GST has been passed by the Lok Sabha, finally. The GST has been many years in the making. In 2000, the NDA set the ball rolling with an empowered committee to look into the matter. Then, the UPA took ownership of the reform and tried to take it forward — in the 2006-07 budget, it was announced that the GST would be rolled out in April 2010. The deadline was incrementally pushed to 2011, 2012 and 2013. Now, the latest target date of April 1, 2016, looms. If it is to be met, the Rajya Sabha must approve the bill soon. The bill only delineates the broad contours and much work remains to be done — the intricate details will have to be worked out by the GST Council envisaged by the amendment, supporting legislation passed, rules drafted and notified, IT framework set up, businesses given time to comply, all in a 10-month period.
But the Congress-led Opposition has demanded that the bill be referred to a parliamentary committee for further scrutiny. This is unnecessary. The reform has not only been discussed threadbare by the empowered committee of state finance ministers, but the 2011 version of the bill, which lapsed with the last Lok Sabha, was studied by the standing committee on finance for more than two years.
Several of its recommendations have already been taken on board — for instance, instead of GST Council decisions being based on consensus, the 2014 amendment bill envisages a three-fourths majority system, in which the Centre has a weightage of one-third of the votes and the states, two-thirds. Other changes include not outrightly exempting petroleum products but leaving the call to be taken later by the GST Council. Of course, the bill is still far from perfect. The most significant change from the 2011 bill is the 1 per cent tax on interstate trade that would be levied to compensate states where supply originates. This will be distortionary. But it is envisaged as only a temporary two-year measure (though it could be extended by the council) and is necessary to push the reform through.
The government will face a difficult challenge in the Rajya Sabha. Already cornered on the land issue, it could be feeling the pressure to accomplish a “big bang reform” in time for its first anniversary. Equally, the stakes are high for a newly enlivened Congress, which has the numbers on its side in the Upper House. But beyond the politics, parties mustn’t lose sight of the fact that the GST is an economic game-changer. It simply cannot be delayed any longer.