Parliament logjam: GST may miss

rollout deadline
Source: Hindustan Times
One of independent Indias biggest economic reforms, the goods and services
tax, may miss its rollout deadline next year as an acrimonious face-of
between the government and Opposition threatens to wash out Parliaments
monsoon session, sources said on Friday.

The key reform bill that aims to create a unified national tax market has a slim
chance of making its April 1, 2016 deadline if the government fails to pass a
pending Constitution amendment bill during the ongoing session because the
states may not have enough time to approve it.
A Constitutional amendment has to be passed by a majority in both Houses of
Parliament with two-thirds of the members voting a condition likely to be
fulfilled only in the winter session, usually held in December.
Once it passes Parliament, it has to be approved in the same manner by a
majority of the 29 states but the GSTs road is made tougher by looming state
elections next year. By March, assemblies in five states would be dissolved in
the run up to the polls, making it difficult for the necessary 15 states to pass
the bill between January and March, especially because assemblies are
expected to take a longer time to discuss the legislation.
After the pending bill is cleared, it has to be ratified in a majority of the state
assemblies. Only then the main GST bill can be passed in Parliament. If the
Constitution amendment bill is passed in the winter session, it is impossible to
meet the deadline, said a senior Union minister.

Parliamentary afairs sources said the 122nd Constitution amendment bill for
the GST may be tabled only in the last week of the session.
The bill which aims to dramatically alter the countrys tax administration by
replacing a string of central and local levies such as excise and octroi with a
single tax is a key constituent of the governments reform agenda that has
run into rough weather in Parliament.
Led by the Congress, the Opposition has repeatedly disrupted both Houses,
demanding the resignation of top BJP leaders over the Vyapam and Lalit Modi
controversies but the NDA has indicated it will yield no ground, creating a
stalemate.
So what if this GST bill misses a deadline? During the UPA rule, we missed
two deadlines in 2010 and 2012. For us, the GST stands for Good and Simple
Tax. Arun Jaitleys GST bill is neither good, nor simple, Congress strategist
Jairam Ramesh told HT.
Congress leaders also pointed out the BJP had washed out two Parliament
sessions in 2010 and 2011 over coal scam and the 2G scandal when it was in
the opposition.
The GST is key to Prime Minister Narendra Modis promise of injecting
investment and boost ease of doing business in the country because a single
tax would come as a boon for industry, which has to often deal with multiple
levies within the country.
Another crucial piece of reform legislation that may have to wait longer is the
real estate bill, which intends to create a regulator in the fast developing
sector, as the Congress is in no mood to allow its passage.
A bill to curb atrocities against SCs and STs may also not get the Oppositions
support though Congress president Sonia Gandhi had demanded early
clearance of the bill in the past.

The government has slated 11 bills for passage during the session but the
Congress is confident it would be able to stall proceedings till the end of the
session. During the past few days, the Congress has even tried to reach out to
regional rivals like the Biju Janata Dal, AIADMK and Trinamool Congress to
build a broader front on the issue of corruption in the NDA administration.
Govt's responsibility to let House function. If govt acts on what we r
suggesting, Parliament will function without any hindrance, CPI(M)s Sitaram
Yechury tweeted.

India ready to accept a not-so-perfect

GST over nothing at all
Source: Bloomberg

New Delhi: After spending about a decade trying to whittle down more than a
dozen state levies into a single national tax, India will settle for two instead.
A parliamentary panel endorsed a compromise that will allow states to receive
a levy of as much as 1% on products made in their territory. It will last for
about two years after the goods and services tax (GST) takes effect.
This is the price that you pay to get everybody who was a stakeholder to
agree to implementing a transformative tax regime, Rajeev Chandrasekhar, a
law maker who sat on the panel, told Bloomberg TVIndia on Wednesday.
The deal paves the way for Prime Minister Narendra Modi to pass one of
Indias biggest economic reforms in decades during the current parliament
session that runs through mid-August. That would keep him on track to meet a
self-imposed April 2016 deadline for implementation.
Under Indias current system, its 29 states operate like different countries. A
truck carrying goods from Tamil Nadu to Punjab needs to pay at least five

different taxes or charges at varying ratesat the factory gate, state borders
and retail points.
The 1% levyand a panel recommendation to avoid cascading taxes
means that Tamil Nadu and other states will temporarily collect extra cash for
products they produce while eliminating the other payments in between.
Perfection unrealistic
The additional tax in the GST model is not a superior kind of outcome, but if
we are waiting for a perfect one to be rolled out, it will be unrealistic, said
Shubhada Rao, an economist at Yes Bank Ltd. Its better to begin and then
fine tune it along the way.
While nearly all of Indias law makers support the idea of a GST, few of Modis
opponents want to grant him a major legislative victory. He faces resistance in
the upper house of parliament, where his party doesnt hold a majority.
If the current constitutional amendment is passed, it then needs to be ratified
by more than half of Indias 29 states. Then parliament must pass another bill
to implement the GST. The overall rate, which would vary for different goods,
will be set by a newly formed GST Council headed by the finance minister.
The opposition Congress party, which originally proposed the GST in 2006,
dissented to the parliamentary panels report. It has also disrupted
proceedings earlier this week to protest corruption scandals involving Modis
party.
Irresponsible action
Congress wants the 1% levy to be removed, the overall GST rate capped at
18% and all major products covered. That includes alcohol, one of the most
lucrative goods that Modis administration had agreed to exempt as another
political compromise with state governments.
I hope Congress will reconsider its irresponsible action, finance minister
Arun Jaitley told law makers on Wednesday.
The panels recommendation that the 1% levy is only applied at the point of
sale might prompt some states that will lose revenue to oppose the bill, said
Sachin Menon, head of indirect taxes at KPMG in India. The current proposal
says the federal government will compensate states for revenue losses for
five years.

Even so, the total gains are likely to outweigh losses over the long term. The
GST will help curb tax evasion, cut logistics costs and boost gross domestic
product by as much as 2 percentage points annually, according to The
Associated Chambers of Commerce and Industry of India.
The retrograde 1% tax can be removed once states see revenues climb due
to easier compliance with the GST, said Dharmesh Panchal, an indirect tax
partner at PricewaterhouseCoopers India. We can live with some aberrations
for a year or two if it means the bill will be passed.