GST: Behind-The-Scenes Parleys With Congress, Public Perception, Did The Trick

It was a debate that did the country proud.

The political class in the Upper House of Indian Parliament rose to the occasion as India marched ahead towards the biggest indirect tax reforms since Independence, by passing the GST Constitution Amendment Bill in the Rajya Sabha unanimously on Wednesday (03 August), after a marathon seven-hour debate. As many as 203 MPs voted for the Constitution amendment bill with no naysayers.

The Narendra Modi government is aiming at an April 2017 rollout of GST.

As Businessworld had written in its Cover Story (dated 25h July – “GST on Course”), the AIDMK walked out of the House after registering its reservations.

It was hectic behind the scenes parleys between Union Finance Minister Arun Jailtey and Congress leaders (they met no less than three times over the last one week) that saw the Congress come around on the legislation, after it had made it a prestige issue of sorts. Of course the public perception – that the Congress was holding back a landmark reform move – played its part. It was also said that Priyanka Gandhi wanted the Congress to soften its stand on the issue.

The bill will now be taken up by the Lok Sabha afresh on Thursday.

With the major breakthrough having been achieved, the scene shifts to the new rate of GST. The Congress, led by its leader P Chidambaram, said that it must not exceed 18 per cent. Finance Minister Jaitley said that they would try sincerely to keep the rate as low as possible, adding that a 17 to 19 per cent rate would be considered.

Chidambaram, as also the smaller parties, felt that the GST rate must be voted upon by both the Houses. Jaitley as at pains to impress upon the Opposition members that the GST Council’s decision making powers were heavily tilted towards the state governments and they would certainly not like over-taxation.

Chidambaram argued that when the Council’s GST recommendation is brought to Parliament, it must be debated upon in form of a finance bill, not a money bill.

The BJP which enjoys a brute majority in the Lok Sabha is in a minority in the Rajya Sabha. While it had managed the numbers on the GST Constitution amendment bill -- even if the Congress were to oppose it – it wanted a consensus on the issue. Fearing isolation on the issue, the Congress too relented.

Faced with negative Press on a host of issues, the latest being Dalit attacks across the country, the GST Bill’s passage comes as a huge boost to the Narendra Modi Government as it also showcases its reformist intent to the industry as also the world outside. According to varied claims, the GST implementation would boost the GDP by 1 to 1. 5 per cent.

The Prime Minister and the Finance Minister profusely thanked the Opposition benches on the cooperation extended on the bill.

The government also hoped that the Opposition’s “constructive opposition” would add to the already hugely fruitful monsoon session of Parliament.