Another session of Parliament has begun with the BJP-led government expressing its determination to ensure the adoption of the Constitution amendment bill to usher in the >long-delayed Goods and Services Tax . Prime Minister Narendra Modi has invested significant political capital in wresting a favourable outcome. In the >recent Cabinet reshuffle, he changed the team in the Parliamentary Affairs Ministry for better floor management. Addressing an all-party meet on the eve of the session, Mr. Modi appealed to members to give primacy to “the national interest” while urging bipartisan support for the GST bill. So far, the Congress had reiterated its credentials in championing the GST during its years in power as proof that it is committed to the tax reform measure, without fully explaining its obstructionism once out of office. But now it has adopted a conciliatory tone on working with the government to hammer out a consensus. With many non-Congress Opposition parties expressing their willingness to see the legislation through, there is hope that the remaining sticking points will be sorted out.
The Centre has, by all indications, >agreed to drop the proposed additional 1 per cent levy on inter-State sales over and above the GST rate, as sought by the Congress. The differences over the dispute-resolution mechanism have also narrowed. The remaining bone of contention involves the question of an explicit cap on the GST rate and whether it ought to be made a part of the amendment bill itself. Whatever the rate, capped or uncapped, it is obvious that the GST regime will boost economic activity. It will subsume multiple indirect taxes, including State-level sales tax, octroi and other levies, that make doing business in India a compliance as well as logistical nightmare. Seamless movement across States is critical for a truly national common market, and for incentivising producers of goods and services to scale up investment and create jobs. A more efficient system for collecting indirect taxes, a far larger contributor to the exchequer than direct taxes, could also create room for higher public investment in areas such as education and health. Certainly, the challenge of warding off incipient inflationary pressures in the early stages of the tax’s implementation will require enlightened policies. For the BJP and the Congress, the next couple of weeks will be a real test of political sagacity in pulling together and delivering on a reform they have both advocated. No party may, for now, get the GST regime entirely of its liking — but it is better to initiate change on the basis of a reasonable consensus rather than wait for that elusive perfect agreement.