By Gaurav Sharma
The current ruckus created in the Parliament over the introduction of the Goods and Service Tax Bill(GST), has resulted in a stalemate between the NDA government and opposition parties threatening a whitewash monsoon session this year.
Finance Minister Arun Jaitley blamed the impasse on the “obstinacy of two Congress leaders”, alluding to Congress President Sonia Gandhi and Vice-president Rahul Gandhi.
Jaitley alleged that the Congress’ demands for resignations of Sushma Swaraj, and two other ministers, was a pretext for stalling the GST bill. However, the Congress refused to backtrack from its stance and continued to shout its motto, “no resignation, no House”.
Meanwhile, JD(U) chief Sharad Yadav and other MP’s from the Samajwadi Party(SP) attacked Jaitley for his inability to push through the bill.
Why has the bill created such a mindless, bitter standoff so as to stall the functioning of Parliament, brazenly splurging precious taxpayer money in a sea of inactivity? Is it mere coincidence that the passage of the bill in the Upper House gratuitously timed itself with serious charges being leveled against top politicos?
This requires an understanding of the Goods & Services Tax.
GST is a tax initiative which aims to bring all indirect taxes under a single tax structure, whereby all goods and services are charged under a national sales tax. It is the backbone of the indirect tax reforms that the Indian government has been aiming to bring forth since 2010, when the then finance minister P Chidambaram proposed it in his budget speech.
GST is part of a constitutional amendment bill for which means it has to be passed by both the Houses of the Parliament.
Under the proposed harmonised taxation system, only the Central government would be able to levy an integrated GST on the interstate transfer of goods and services and imports. Rates of tax, supply principles, special state provisions and levy period for additional tax would be determined (recommended) by a GST Council.
How will it help the economy?
Although the provisions of the bill are not strictly conforming to an ideal GST regime, the tax would bring a sea change in the way business is conducted in the country and the way economy revolves.
It will iron out the kinks in the current indirect tax structure, broaden the tax base (thereby filling the government coffers), increase compliance and prevent the gory practice of double taxation.
Economic distortions which further make life difficult for businesses running at a pan-India level, will be wiped clean, providing much-needed ease-of-doing-business for corporates. Manufacturing activity would start rising and tax compliance would become simpler.
Finance Minister Arun Jaitley boisterously described the GST as the biggest tax reform in India and went to say that it would add a substantial 2 per cent to the growth rate of the country.
Issues pertaining GST
The GST has its fair share of contentious issues. First of all, the provisions of the bill declare an additional tax of 1 per cent (for 2 years) on inter-state trade or commerce by the Centre, thereby precluding the visualized aim of taxing value addition and not trade.
Furthermore, the exclusion of alcohol and petroleum from the ambit of the GST Bill puts question marks on the resolve of the government to ushering forth a strong taxation regime.
Some states have voiced concerns over potential revenue losses in light of the change in tax infrastructure. Still, in the long run, one can expect prices to fall and delivery of goods and services to become more efficient, bringing much cheer to the inflation saddled shoulders of the consumer.
Indian products, both in domestic and international, can be expected to become more competitive due to the fall in price. A surge in exports would cut India’s current account deficit (CAD) significantly, which can have a cascading effect on the strength of the rupee.
It would not be too far-fetched to imagine a vast improvement in India’s standing in the global markets, if the GST is implemented swiftly, without any red-tapism.
GST has not only caused a scuffle between politicians but has agitated the corporate groups. Most of the corporate honchos blame the Opposition for delaying the implementation of GST.
More than 61 per cent of the respondents of an ET poll felt that the delay would be a setback, a pushback to the economic recovery. Majority felt a complete economic recovery would be difficult to accomplish by April 2016, the deadline set for the passage of the bill.
If the opposition comprising of 68 Congress, 10 Left, 11 AIADMK MPs continue to battle tooth and nail against the bill, their credibility as pro-reform political parties will be questioned.
While the Rajya Sabha requires the sanction of at least two-thirds majority to pass the bill, the prospective opposition alliance would fail the bill by seven votes in the house of 245 members.
Considering the fact that barely 2 days remain for the end of the monsoon session, it is highly unlikely that the government would be able to introduce the bill. The opposition in its political zealousness has resorted to a desperate measure of log jamming the Parliament.
Protesting against a pro-market, pro-economy legislation, shows the degraded levels to which our politicians have stooped to, without giving a hoot to the slick democratic machinery of the country.
Our politicians swear by the Constitution, it is time they start abiding by it.