There are signs of a thaw in the Congress’s strong resistance to the passage of the Goods and Services Tax with the principal Opposition party open to discussing its most critical demand of a cap on the tax rate in the Constitutional Amendment Bill.
GST is a significant indirect tax reform which is estimated to add 1-1.5 per cent to the country’s economic output.
“We want an assurance from the government on ‘ring-fencing’ of the tax rate… Let the government come with options,” Anand Sharma, deputy leader of Congress in the Rajya Sabha told The Indian Express. When asked to elaborate, he said, “Let them (the government) talk to us.”
While sources in the government said informal channels of communication with the Congress are active, Sharma said, “So far, the Narendra Modi government has not approached the Opposition parties for a discussion. It took the Prime Minister one-and-a-half years to meet all Opposition parties on February 16, 2016. There has been no meeting since then.”
In November 2015, the Congress had spelt out three specific demands in the GST legislation: an 18 per cent cap to be mentioned in the Constitutional Amendment Bill, formation of a GST Disputes Settlement Authority and scrapping of the proposed one per cent additional tax that ends up favouring producer states.
Finance Minister Arun Jaitley has, however, consistently said no to making the tax rate as part of the Constitutional Amendment Bill arguing that this entails going to the legislature every time there is a rate change.
Congress leaders have over the last few days discussed the political fallout of what can lead to a possible isolation of the party within the larger Opposition. Barring Tamil Nadu, all state finance ministers including those from Congress-ruled states, had approved the model GST law to be adopted by all states. Even Left-ruled Kerala had stated it wanted GST.
Sources in the party said, some Congress leaders were not on the same page on this demand as early as a year ago. The differences came to light at a working committee meeting of the party where it was noted by some leaders that the UPA government itself did not have such a provision in the Bill. Subsequently though, the Congress decided to press for a rate cap in the Constitutional Amendment Bill.
Tax experts involved in the exercise said the government can put forth certain options to satisfy the Opposition. “Instead of putting a rate cap, the government can think of a cap on the indirect tax as a percentage of GDP. This is not so rigid. If the number goes above a certain percentage, the GST Council can recommend a review. The other more straightforward option can be to state that tax rates be set based after discussing these in the GST Council. The GST Council can strongly recommend the adoption of the lowest possible rate,” an outside expert, closely working with the government on the issue, said.