GST offers some renewed hope for Indias tax reform

The Goods & Service Tax (GST) Bill, which has been held up in the Rajya Sabha for years, now stands a good chance of being passed into law. The Congress, which has been opposing the bill in its current form with support from like-minded parties, looks politically isolated following the change in the composition of the Upper House, where the ruling National Democratic Alliance (NDA) now has more members than the Congress-led United Progressive Alliance (UPA) after biennial elections on June 11 and a profound change in the political mood in the country after the last round of Assembly polls, in which the Congress was routed in four states. This has brightened chances for the passage of the GST Bill, which proposes to replace a welter of central and state-level taxes with a single levy that will make tax administration easier and stitch India's 29 states and seven Union Territories into a single market.

The bill, which many have called the most ambitious tax reform ever undertaken in India, has already been passed by the Lok Sabha but is held up in the upper house because of Congress objections to some of its provisions. Being a Constitution amendment bill, the GST legislation has to be passed by a two-third majority by both houses of Parliament. In the 245 member Rajya Sabha, it needs the support of 164 members if all members vote on it. Addressing the media after a meeting of state finance ministers on GST in Kolkata, finance minister Arun Jaitley said all political parties barring the Congress and the Jayalalitha-led AIADMK, which rules Tamil Nadu, have extended support to the bill.

Speaking to TV channels soon after returning to power with a thumping majority on May 19, West Bengal chief minister Mamata Banerjee said her party would support the passage of the GST Bill as “it was an election promise”. The Left parties, which have been making common cause with the Congress in opposing the bill, seems to be coming around. Newly elected Kerala chief minister Pinarayi Vijayan has openly declared that the introduction of the goods and service tax will be good for his state and said his party should support its passage. But given the proximity of CPI(M) general secretary Sitaram Yechury with the first family of the Congress party and his less than cordial ties with the Kerala leadership of his party, it is not clear which way the Left's nine Rajya Sabha MPs will vote. So, as things stand, the NDA has 81 committed votes for the GST Bill. Then, there are another 76 members from various opposition parties who have publicly supported the legislation. That's 157 votes for the bill.

On the other side of the aisle are the Congress, with 54 members and other smaller parties and Independents who account for another six votes. Government managers are confident that even if the Left finally votes with the Congress, they can convince the AIADMK, which has 13 members in the Rajya Sabha, to at least abstain. This will bring the effective strength of the House to 232 and the two-third mark to 156. And if Vijayan can convince his comrades to break ranks with the Congress and vote in favour of the bill, Jaitley will not even have to break into a sweat to ensure the passage of the GST Bill. Of course, the Congress could still disrupt the House on one pretext or the other to try and stall the legislation but it would risk a serious public backlash if it is seen as the only party opposing a law that is expected to raise the GDP growth rate by two percentage points over a period of three to four years. In a sign of its confidence, the government has announced that it will introduce the bill in the Rajya Sabha during the Monsoon Session of Parliament that begins on July 18. “We are still hoping that the Congress will support the bill so that it can be passed by consensus and we will continue every effort to bring the party on board. But if it remains adamant on opposing the bill, we will go ahead without it as we have the numbers to pass the legislation,” a senior BJP leader said.

Arnab Mitra is Consulting editor, India Inc. He writes on business and politics.