Fourteen states have already ratified the constitutional amendment bill that clears the way for the introduction of the good and services tax (GST). It now seems likely that the landmark tax reform will soon get the support of more than half the states, as is mandatory. Tamil Nadu continues to be sceptical about the proposed GST structure while West Bengal seems to be watching from the sidelines.
The next bargaining challenges are now on the horizon. The GST rate is the most important among them. Even a cursory reading of media reports on the debates about the GST bill in different state legislatures shows that there is a deep concern about the rate at which the new tax will be imposed. The states have taken the brave step of signing away many of their fiscal powers to New Delhi. The Union government will now have to allay fears that states may lose revenue while at the same time ensuring that the GST rate is not unacceptably high.