A bizarre theory doing the rounds in the capital is that the Indian National Congress, which seems to be opposing the Goods and Services Tax Bill (GST), only wants to defer it by a year. The theory is that it would like the NDA government to bear the full brunt of the teething troubles the indirect tax reforms may entail, like an all-round rise in prices, on the eve of the general elections 2019.
The Narendra Modi government is keen to roll out the GST by 1 April 2017, so it may have enough time to prepare for the Big Test in 2019. At this juncture, the Modi government is confident that it would be able to get the GST Bill passed in the monsoon session of Parliament, starting 18 July.
While the Congress leadership remains adamant on the three-point agenda that party president Sonia Gandhi and former Prime Minister Manmohan Singh had proposed to Prime Minister Narendra Modi last year, another detractor — the AIADMK — has softened.
An AIADMK leader, requesting anonymity, says the GST legislation will, in all probability, be passed in the forthcoming session of Parliament, notwithstanding the AIADMK’s principled opposition to the indirect tax reforms.
After J. Jayalalithaa’s re-election as Tamil Nadu’s chief minister, PM Modi was among the first to congratulate her. A bridge-building exercise by Union ministers ensued, led by finance minister Arun Jaitley. A tirade against her by some Union ministers did rub Jayalalithaa the wrong way, but the PM’s gesture is believed to have softened her, say sources. Recently, she had a cordial meeting with Modi during her visit to Delhi.
So the AIADMK, which had raised “principled objections” to the GST regime at the empowered committee meeting in Kolkata recently, could walk out of the Rajya Sabha during the voting on the Bill to provide the much needed breathing space to the BJP-led government. The party has 13 members in the Rajya Sabha.
Of course, the Union finance minister has said the interests of manufacturing states would be taken care of. His deputy, Jayant Sinha has added that the manufacturing states would stand to gain over a period of time (see the accompanying interview).
With the AIADMK neutralised, the Congress and to some extent the Left remain isolated over the Bill. But that’s only half of the story.
Many state leaders, including CMs, ex-CMs of Congress-ruled states, as well as leaders of the CPI(M), told BW Businessworld that they welcomed the legislation, pointing to a larger disconnect with their central leaderships.
“This is just an ego issue now. Otherwise I see no reason why this legislation should not be passed,” says former Maharashtra chief minister Pritihviraj Chavan. Former Delhi chief minister Sheila Diskshit says the GST was moved by the Congress and that the BJP had “politicised it”. “We started it. It’s for the benefit of India,” she says.
Himachal Pradesh CM Virbhadra Singh, widely considered a doughty fighter, says he supports the Bill. Singh, who is also the finance minister of the state, was one of the few state chieftains, who thought it fit to refer to the “concerns” that the Central leadership had.
Uttarakhand finance minister Indira Hridayesh says her state is ready to welcome GST, even though the state has other pressing issues to grapple with.
In the only “large state” ruled by the Congress — Karnataka — additional chief secretary (finance) I.N.S. Prasad, and commissioner for commercial taxes Ritvik Pandey are training officers for a GST regime on a war footing. Chief minister Siddaramaiah holds the finance portfolio.
Asked as to the apparent divide in the party, whereby chief ministers were backing the Bill while the party’s central leadership expressed reservations on it, Puducherry chief minister V. Narayanasamy says it has to do with the manufacturing and consuming states’ divide. Yes, it helps that most Congress states in the country today are ‘consuming’ states.
BW Businessworld also asked ideologue Jairam Ramesh the same question, and according to him, the divide probably had more to do with the additional revenues that the states would get in the long-run in the GST regime (and hence the states’ support for GST). When Sonia Gandhi and Manmohan Singh met Prime Minister Modi last November on GST, they put forward a three-point wishlist, seeking a cap on the GST rate at 18 per cent in the Constitution Amendment Bill, deletion of the provision which allows imposition of one per cent tax by additional levy and an independent dispute resolution mechanism.
While the government has conceded ground on the latter two, it says there’s just no way it can agree to the first demand of the Congress. Much like the Congress, the central leadership of the CPI(M) has maintained an ambivalent stand on GST, irking its two party-ruled states of Kerala and Tripura.
Sitaram Yechury, CPI(M) general secretary, has said that the Bill in its present form, takes away from State governments whatever little power they have to raise funds. “The states will become totally dependent on the mercy of the Centre even for emergency funds in case of a natural calamity or to fund welfare schemes,” he says.
The states ruled by the CPI(M) have taken a categorical stand that cocks a snook at the Congress demand for an 18 per cent cap in the Constitution Amendment Bill. Kerala finance minister Thomas Issac, a member of the CPI(M) central committee, has openly said GST would benefit a ‘consumer’ state like Kerala.
Tripura finance minister Bhanu Lal Saha echoes his thoughts,“We will do nothing to oppose GST.”
Sources in the government say that they are closely looking at the arithmetic in the Rajya Sabha. After the last round of elections to the Rajya Sabha, the BJP’s numbers have gone up to 54 (from 46). The Congress has 60 MPs.
The BJP’s strength in the Rajya Sabha goes up to 81, with the support of allies like the TDP, the Shiromani Akali Dal, Shiv Sena, Sikkim Democratic Front, People’s Democratic Party, Bodoland People’s Front, Nagaland People’s Front, the Republican Party of India (Athawale) and four independents and five nominated members. In a House of 245 members, the BJP needs 164 votes to pass the GST Bill.
With the support of the All India Trinamool Congress (12 members), Samajwadi Party (19), Bahujan Samja Party (6), Biju Janata Dal (8), NCP (5), RJD (3), Telangana Rashtra Samiti (3) and smaller parties like the YSR Congress, Indian National Lok Dal, Indian Union Muslim League, Jharkhand Mukti Morcha, Janata Dal (Secular) and Kerala Congress, the government’s tally goes up to 157 — still short of the three-fourths mark.
In such a scenario, the AIADMK’s walkout from the House (or abstention) could help the government bring down the required two-thirds mark to 155 (with the strength of the House having been brought down to 232).
The Modi government, thus, will be home. Of course, questions are already being raised on whether the SP and the BSP would be on the same page. The Prime Minister’s emphasis on the “poor of UP” in the context of GST in his recent interview to Times Now, therefore, seems significant.
Union Parliamentary Affairs Minister M. Venkaiah Naidu says the government wwill like to evolve a national consensus on GST, even though it has the numbers to pass
the Bill.
Beneath the veneer of confidence that the government demonstrates, lies a sense of urgency — if it misses the 1 April 2017 rollout date, the implementation of the transaction tax could lead to chaos, three to six months down the line.
That there could be unforeseen consequences at the hustings in 2019 is something that the Modi government cannot afford to overlook if it misses the 1 April 2017 bus.
suman@businessworld.in
@skjsumankjha
BW Reporters
Suman K Jha was the deputy editor with BW Businessworld
