Test of political will on GST

December 08, 2015 03:02 am | Updated December 04, 2021 11:00 pm IST

The BJP-led National Democratic Alliance government has rolled up its sleeves for the ongoing winter session of Parliament in a bid to guarantee the passage of the Constitution amendment Bill that will usher in a Goods and Services Tax. The government, which has staked a lot of political capital on ensuring that the April 1 target deadline for the implementation of GST is met, has moved to try to build a consensus through a combination of political outreach and an internal reappraisal of some of the contentious features of the tax measure.

Prime Minister Narendra Modi met his predecessor Manmohan Singh and Congress president Sonia Gandhi to court bipartisan support for the legislation in the Rajya Sabha, where the Congress still has the upper hand. And the government has said it hopes to continue talks with the Opposition to reach an understanding. Separately, a panel headed by Chief Economic Adviser Arvind Subramanian has recommended the government make some modifications to its proposals that are seen as helping to pave the way for a resolution of the political deadlock over the Bill.

Among key suggestions are that the government drop the proposed additional 1 per cent levy on inter-State sales over and above the GST rate, and that alcohol and petroleum products be included in the ambit of the tax. Crucially, however, the panel shied away from endorsing the Congress’s demand for writing into the statute an explicit cap of 18 per cent on the standard rate of tax. Dr. Subramanian reasoned it would be unwise to limit the future freedom of the political process by laying down the minutiae of policy. This could well end up being a bone of contention.

For both the government and the Congress, a lot now rides on the political calculations the two sides make ahead of a clutch of State elections due next year. On test will be the sagacity and statesmanship of their respective leaders. A Congress spokesperson was emphatic that the onus of finding a resolution to the differences lay with the government. The party stands by its core demands that include the introduction of robust accountability measures.

The party claims that the government’s efforts to communicate with the Opposition have been high on atmospherics and low on substance. It is now time both sides rose above partisan considerations. That the implementation of GST will help reduce the cascading impact of the prevailing multiplicity of taxes has been well-established. The projected benefit to the economy from an expected improvement in administration and compliance of the indirect tax regime is also fairly beyond doubt.

The challenge will remain in warding off incipient inflationary pressures in the early stages of the implementation of the tax, and enlightened politics is needed here. Both the Congress, which had once championed the GST, and Prime Minister Modi need to show the political will to get this key reform measure passed to create a common market that could spur growth.

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