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GST Bill: Congress retreats, tax reform comes closer to reality
July, 16th 2016

The Congress party on Friday indicated that it could support the crucial constitutional Bill for the goods and services tax (GST) in the Rajya Sabha if the government agrees to cap the tax rate in the statute, a climbdown from its earlier demand that the rate ceiling be specified in the Constitution itself.

The Congress party on Friday indicated that it could support the crucial constitutional Bill for the goods and services tax (GST) in the Rajya Sabha if the government agrees to cap the tax rate in the statute, a climbdown from its earlier demand that the rate ceiling be specified in the Constitution itself. With this development, the long-delayed tax reform is set to cross a major milestone as the Bill, passed by the Lok Sabha and requiring at least half of the Upper House to be present and supporting with a two-thirds majority, could be passed during the winter session starting on Monday.

Finance minister Arun Jaitley and minister for parliamentary affairs Ananth Kumar on Friday met senior Congress leaders Ghulam Nabi Azad and Anand Sharma in a bid to help break the impasse. “We are trying to build consensus on GST. We have discussed all the points. Once the session starts, we will meet again after discussing the issue within our respective parties,” the finance minister said after the meeting, which lasted close to an hour.

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While sources confirmed the Congress’ relenting, Azad said: “We had an in-depth discussion. We gave our point of view, they gave theirs. We put forth our apprehensions and suggestions. We will get back to our leadership and they will get back to their leadership and then we will meet again.”

Sharma said, “The talks are on. We will brief our leadership and will meet again after the session starts.”

While the ruling National Democratic Alliance (NDA) has only 72 members in the Rajya Sabha, whose current strength is 244, several non-NDA parties — with a total strength of close to 100 — had agreed to support the Bill in what opened the possibility of the Bill’s passage even without the support of the Congress with 60 members.

The GST is a crucial reform that could produce incremental economic growth as it would remove cascading of indirect taxes, reduce the incidence of taxes on businesses and consumers, facilitate a pan-India market for goods and services and potentially make Indian goods more competitive in the world markets.

The Congress has been stubborn in demanding some crucial changes in the GST Constitutional Amendment Bill, including mentioning the GST rate ceiling in the Constitution. The government has indicated that it is willing to drop a plan to introduce a 1% tax on interstate transactions, which was meant to help “manufacturing states” as the GST, being a destination-based tax on consumption, is expected to boost the revenue of “consumption states” rather than the former.

Last month, at a meeting of the empowered committee of state finance ministers held in Kolkata, almost all states in the country — with the only notable exception of Tamil Nadu — lent their weight to the Centre’s determined bid to quickly usher in the GST by endorsing its model GST law and decried the Congress party’s obdurate demand for capping the tax rate in the Constitution, leaving the main opposition party virtually isolated in the matter.

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