BackNDA blows hot and cold over GST deal with Congress
Arun Jaitley questions rationality of the Congress's demand for changes in the proposed GST, but said he was ready to discuss the issue with the opposition
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New Delhi: Two days before the winter session of the Parliament begins, finance minister Arun Jaitley on Tuesday forcefully questioned the rationality of the Congress’s demand for changes in the proposed Goods and Services Tax (GST), but said he was ready to discuss the issue with the opposition.
Jaitley’s remarks seemed to signal a blow hot-blow cold approach by the National Democratic Alliance (NDA) government, which had on Monday indicated that it was considering some of the key demands raised by the Congress.
The government has so far struggled to strike a compromise with the Congress to win its support for the GST constitutional amendment bill in Rajya Sabha.
The Congress is insisting that the government do away with a proposed additional 1% levy on the supply of goods, over and above GST, and wants a revenue-neutral rate not higher than 18% to be mentioned in the GST bill.
It also wants a dispute settlement authority to be headed by a judge to resolve disagreements between states and the centre. It is insisting that the states be assigned three-fourths voting rights in the powerful GST council instead of the two-thirds proposed by the government.
Jaitley opposed all the Congress suggestions except the one relating to the 1% additional levy.
At an Associated Chambers of Commerce and Industry (Assocham) event, Jaitley noted that President Pranab Mukherjee, when he was finance minister, had introduced the GST bill, and his successor P. Chidambaram had accepted the recommendations of a standing committee that studied the legislation.
According to the government, the revenue-neutral rate should find mention in the GST bill and not in the constitutional amendment bill that will pave the way for a single, nationwide tax that will subsume all central and state levies and remove barriers to trade in goods and services.
“Now to come out with a preposterous suggestion that a tariff must be mentioned in the constitution document, it would be extremely unfair if we try to impose on the country a
GST with a defective architecture in the name of political compromise," said the finance minister.
“It’s a flawed architecture if tariff has to be mentioned in the Constitution itself. It was not there in Mukherjee’s bill; it was not there in Chidambaram’s bill," he said. It should be left to an elected government to decide on a “rate which is the bare minimum required", he said.
The passage of the GST constitutional amendment bill has already been delayed beyond its scheduled rollout date of 1 April 2016, after being stalled in the Rajya Sabha, where the National Democratic Alliance (NDA) is in a minority. It requires to be ratified by at least 50% of the state legislatures before it becomes law.
Bharatiya Janata Party (BJP) has only 48 members in the 245-member upper house and the total strength of the NDA is 64. To get the constitutional amendment bill passed, the coalition needs a two-thirds majority, or the support of at least 163 members in Rajya Sabha.
On the Congress demand for assigning states three-fourths of the votes in the GST council, Jaitley said that if the centre accepted the proposal, its vote would be reduced to one-fourth and the states will effectively set India’s taxation policy.
“The government of India, by accepting such suggestions of flawed structure, cannot be a stranger to India’s taxation policy," he said.
Under the government’s proposal, states and the centre will have two-thirds and one-third voting rights, respectively, in the council.
It would require a three-fourths majority for a decision to be taken, forcing both the centre and the states to work in tandem.
On the other proposal by the Congress that a judge should head the dispute settlement authority, Jaitley said a division of powers between executive, legislature and judiciary is one of India’s basic features.
“Taxation is one of very few powers that Parliament has. In the world’s biggest democracy, should the power of taxation also go to the courts? A party having ruled India for almost over 60 years, to make a suggestion of this kind, I think they have to revisit some of these suggestions. I have no difficulty in discussing with them. But a GST with a flawed architecture can damage the system. We are reaching out to them. We are ready to discuss with them," Jaitley said.
Criticizing the Congress for playing an obstructionist role in the government’s efforts to roll out economic reforms, Jaitley said those who stall reforms must realize that the India of 2015 is not the India of 1971.
“The space for obsolete thinking in India is now shrinking. India is becoming increasingly aspirational. It’s not merely the middle-class," he said, adding that those aspiring to join the middle-class too had become aspirational.
“They also believe that they can also find their place under the sun. That constituency today which is aspirational, which supports growth, which supports reforms is inherently much bigger that those who oppose. Therefore, this is a challenging moment where on account of contradictions, either in our policy or our politics, we can neither allow the current generation or the future generation to suffer," he added.
Amit Kumar Sarkar, partner at Grant Thornton India LLP, said some of the demands of the Congress party are not logical.
“GST bill under discussion is to amend the Constitution and the Indian Constitution does not contain any direct or indirect tax rates. This can be taken up in the model GST bill which will be discussed later," he said.
Sarkar said that there is some merit in having a dispute settlement authority as all minor differences between the states and the centre cannot be taken to the GST council.
On the additional 1% tax levy, Sarkar said though it is unpopular with industry, it may have to concede and let it go through.
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