As Parliament’s winter session gets underway, political battlelines have been drawn sharply. While several bills are on the agenda, the topmost priority is the passage of a constitutional amendment bill that will enable the introduction of the Goods and Services Tax regime by April 2016. The proposed GST will subsume all indirect taxes and is expected to improve ease of doing business as well as boost government revenues as it unifies the whole country into a single market. Despite bipartisan support for the idea, the GST bill has been stuck for the better part of a decade. Its initial introduction was planned in April 2010. The NDA government has passed the bill in the Lok Sabha, but failed to build consensus in the Rajya Sabha, where it lacks a majority. Now, the inability to pass the GST bill will be seen as the weakening of the NDA’s reform momentum, with adverse impact on the investment climate. The NDA has failed to pass the other key legislation — the land acquisition bill — after a near-washout of the monsoon session. Moody’s Investors Service on Wednesday cautioned against the “potential headwinds” in case the drift continues. To be sure, weak global cues — India’s exports have fallen for 11 straight months — and an impending US rate hike may further aggravate the gloomy news for the Indian economy.
Three outstanding issues need to be resolved. The most important one has to do with the exact quantum of the GST rate. The Congress is adamant this number should not be more than 18 per cent, generally understood to be the revenue-neutral rate. State governments, foregoing their capacity to tax under a GST regime, reportedly resent a higher rate. A higher rate may also bring down compliance. However, the BJP has described the demand to cap the GST rate at 18 per cent — in such a manner that changing it will require a constitutional amendment — as preposterous. Another point of contention is the proposed 1 per cent inter-state levy, which the Congress wants scrapped. The last contention is about the way disputes should be resolved and the involvement of a judge in the process.
While leaders from both parties have expressed the desire to find a compromise, it is obvious that unresolved issues, which have nothing to do with the GST bill, are at play. Congress vice president Rahul Gandhi sounded combative on Wednesday when he said that the BJP cannot “shut out” the Congress. On the GST, however, it is high time the Congress looked within and acknowledged the limits of an obstructionist politics. At the same time, it is also true that the primary responsibility for passing legislation lies with the government. Instead of publicly daring the Congress, the BJP should try to mend fences with the Opposition.