How the political battle on GST was won5 min read . Updated: 05 Aug 2016, 11:01 AM IST
NDA split the opposition and reached out directly to the Congress leadership, while Narendra Modi personally made overtures to non-Congress chief ministers
At the end of the budget session of Parliament in May, few were willing to bet that the National Democratic Alliance (NDA) would succeed in winning passage for the constitution amendment bill enabling roll-out of the goods and services tax (GST). At best, it was thought to have an outside chance.
Yet, on 3 August, at the end of a near eight-hour debate, the Rajya Sabha passed the bill after the ruling coalition managed to forge a political consensus that only months ago seemed impossible. What caused this dramatic turnaround?
The NDA’s strategy, according to key interlocutors in behind-the-scenes negotiations, seems to have been three-fold.
First, the NDA split the opposition on Congress and non-Congress lines. Second, it reached out directly to the Congress leadership, soothing ruffled feathers after months of vitriolic exchanges across the aisle that often ended up disrupting Parliament. Third, Prime Minister Narendra Modi personally made overtures to non-Congress chief ministers.
The NDA was acutely conscious that this session was realistically its last chance to push GST through. By the winter session, most political parties would be gearing up for a raft of crucial state elections, including high-stakes polls in Uttar Pradesh. In such a politically fraught environment, a compromise would be very difficult.
Accordingly, the NDA strategists ensured that negotiations, unlike in the past, took place outside media glare. This gave it the advantage of surprise. It helped that fundamentally, there was no opposition to the idea of GST; the differences were political and the GST bill was becoming collateral damage.
By elevating West Bengal finance minister Amit Mitra as the chairman of the empowered group of state finance ministers, the NDA enlisted the powerful Trinamool Congress chief Mamata Banerjee as a stakeholder in the fight for GST.
Simultaneously, the Prime Minister used every interaction to engage and convince other chief ministers on the efficacy of a GST regime.
This strategy came to a boil at the inter-state council meeting on 16 July. The meeting, chaired by the Prime Minister, gave the government an opportunity to interact with several chief ministers and state ministers. Senior ministers from the Union government used the occasion to hold informal discussions with state leaders on the GST bill pending in the Rajya Sabha.
In the run-up to the meeting, Bihar chief minister Nitish Kumar signalled his break from the Congress by issuing a public statement supporting the bill.
“The passage of GST is in the interest of the country. We support GST and have favoured it since the beginning," Kumar told reporters in Delhi on 19 July.
Almost immediately, the Rashtriya Janata Dal, too, lined up behind the rapidly growing support for the landmark tax reform among non-Congress state governments in the country.
The NDA consolidated this support at the meeting of the empowered committee of state finance ministers in New Delhi on 26 July.
Even the chief ministers of Congress-ruled states guardedly defended the idea of GST and struck a chord with sections within the party who believed the Congress had gone too far in playing the politics of numbers in the Rajya Sabha.
“The meeting of states on GST was the turnaround. A series of talks had already happened in the top leadership and voices of disagreements started becoming vocal within the party during internal meetings. I think the top leadership weighed in and thought the political risk of opposing GST was becoming too high," said a senior Congress leader from the Rajya Sabha, on condition of anonymity.
Inspired by growing support outside the NDA, the Union cabinet on 27 July approved key changes, some of which had been proposed by the Congress, to the constitution amendment bill for GST.
The cabinet did away with a 1% additional levy on supply of goods and proposed full compensation to states for five years for revenue loss arising from the transition to GST.
In the process, the NDA enlisted the Congress as a co-author of the GST bill—a politically clever strategy, especially given that it was the Congress-led United Progressive Alliance government that first proposed GST 10 years ago.
Simultaneously, senior members of the NDA personally engaged interlocutors in the Congress. These engagements were almost daily features in the run-up to the monsoon session of Parliament, which began on 18 July.
And since they took place outside media glare, the Congress MPs were willing to go along and not have to explain their change of stance.
Increasingly, it was clear that the Congress risked isolation if it pressed ahead with its stance of non-cooperation. The pressure increased when former alliance partners Nationalist Congress Party, Samajwadi Party and Bahujan Samaj Party deserted the ranks. Yet, a consensus was not guaranteed.
“The biggest problem for the government was that there was no consistency in the Congress’ response. We were engaging with two groups. The group of leaders in Rajya Sabha was more reasonable while the younger generation leaders in Lok Sabha were not ready to realize that the party was increasingly getting isolated. The turnaround, in a way, happened because of the consistent negotiations in the first two weeks of the monsoon session. Negotiations moved faster after the cabinet accepted some of the recommendations of the Congress," said a senior NDA leader, requesting anonymity.
With only the All India Anna Dravida Munnetra Kazhagam (AIADMK), Tamil Nadu’s ruling party, still opposing GST in the upper House after Left parties agreed to support the bill, the Congress’s isolation was complete.
The risks of a political self-goal were increasing by the day, something that was conveyed unambiguously by senior leaders of the Congress in the Rajya Sabha to Congress president Sonia Gandhi.
Consequently, the government succeeded in securing support of 72 MPs of different regional parties. Together with their 72 MPs and 15 independent and nominated members, the NDA was all of a sudden in striking distance of the two-thirds majority required to pass a constitutional amendment in the 245-member upper House.
A key calculation in this math was that the AIADMK would, even while opposed to GST on principle, not play spoiler—and true to form, the party’s MPs walked out ahead of the vote, ensuring consensus among the MPs present and voting.
“The fact is that at the end of it all, most political parties came around and supported the bill. Frankly, there was no other option left with the Congress party. There were differences within the party and supporting the bill was the only face-saving, honourable option left for the Congress party which had found itself in a political tangle," said N. Bhaskara Rao, a New Delhi based political analyst.
By eventually supporting the bill, the Congress “behaved as a responsible political party", he added.