Lawmakers let another GST opportunity go abegging with washout of winter session

GST has been missing several deadlines in the past. Perhaps, the only major reform both India and the World were looking at from the Parliament’s winter session was the passage of the 122^nd Constitutional Amendment Bill, 2014 (“122^nd CAB” or “GST Bill”), which promised to bring in the biggest indirect tax-reforms in the Country ever happened.

The Lok Sabha and the Rajya Sabha have been adjourned sine die on December 23, 2015, marking yet another washout due to frequent disruptions by the opposition. The 20-day session was little productive as compared to the monsoon session, which was a virtual washout following the ruckus created by opposition pressing for ouster of external affairs minister Sushma Swaraj, Rajasthan CM Vasundhara Raje and Madhya Pradesh CM Shivraj Singh Chouhan over various allegations.

But the moot question which remains unanswered is “So what changed from Monsoon to Winter - virtually nothing”. The question really is where do all this leave 1.25 billion Indians waiting to see the progress of the Country and see the fruits of economic growth finally reaching their door steps? There aren’t any tangible results for them.

“Overall it’s been a very disappointing session in Parliament. Obviously our expectation was that we will be able to get the GST constitution amendment bill passed. There was a very broad consensus across all parties. Unfortunately, the Congress party has decided, it wants to wreck the Indian economy,”

Minister of State for Finance, Shri. Jayant Sinha

Amidst high hopes, GST Bill again hangs midway

The release of following four Draft Business Processes of GST on public domain, in order to engage with the stakeholders and invite comments from the public at large, arose strong hopes as regards the initiative of the Government to have GST in the country:

• Draft Report of the Joint Committee on Business Processes for GST on Refund Process;
• Draft Report of the Joint Committee on Business Processes for GST on Registration;
• Draft Report of the Joint Committee on Business Processes for GST Payment Process;
• Draft Report of the Joint Committee on Business Processes for GST on GST Return

This initiative was immensely appreciated by the Trade. Further, the Committee headed by the Chief Economic Adviser, Dr. Arvind Subramanian, had given its recommendations to the Finance Minister in early first week of December, followed by Detailed Report recently released on December 9, 2015, recommending a four-tier rate structure wherein some essential items will be taxed at 12%, gold and precious metals at 2-6%, some so-called sin or demerit goods like luxury cars and tobacco products at 40% and most goods and all services at 17-18%. These rates were derived from a RNR of 15%-15.5%.

Furthermore, on December 21, 2015, Shri. Prakash Kumar, CEO of the Goods and Services Tax Network (GSTN), has assured that Infosys, which a few months ago won a landmark Rs. 1,380-crore contract from the Government to develop a state of-the-art technology platform for the proposed GST, is going ahead with the project despite the delay in the GST Bill getting passed.

With the progress going on, the Industry Inc. was pinning high hopes for the GST Bill to see the light of the day. But, the virtual closing of the Winter session without GST Bill getting passed, is a major blow to the Government so as to get the economy back on track.

No doubt, Congress has been stalling passage of the GST Bill over its demand for a simple GST regime. But, this time the BJP was so close to a consensus on the GST Bill, considering that the three critical demands raised by Congress—capping the 18% GST rate in the Constitution, doing away with the 1% additional tax on inter-state supply of goods and creation of dispute resolution mechanism—were by no means a herculean task. BJP could have dealt with these with a bit more skillful approach and break the Congress barrier. Even, our Hon’ble Finance Minister Arun Jaitley hinted at accepting Congress’ stand on scrapping of 1% additional tax but said that their demand for incorporating the GST rate in the Constitution Bill was not agreeable.

What lies ahead?

Clearly, the time is running out for the Modi Government to make major reforms happen in the economy. The promised reforms agenda of the Modi Government is yet to take place in a major way. The Government is mulling waiting till the budget session of the Parliament to secure passage for the GST Bill. The Government is expecting improved numbers in the Rajya Sabha in April 2016 since a number of Congress members are retiring in March and April next year. The Budget session starts in February-end and continues until the first week of May.

Our Comments:

The delay in the passage of the GST bill has put a question mark on the planned roll out of the GST era by the appointed date of April 1, 2016, which now seems to be cumbersome task for the Government to meet a self-imposed deadline.

The GST Bill which will subsume major of the Indirect taxes into one uniform levy across the Country, has to be first passed in the Rajya Sabha with 2/3^rd majority followed by its ratification by at least 50% of the States before it becomes law of the land. Following this, the Government will set up the GST Council within 60 days from the date of commencement of 122^nd CAB, with the Union Finance Minister as the Chairman and Minister of State, Finance/Revenue & the State’s Finance Ministers as members to decide on the crucial issues of the final design of GST including GST rates, threshold exemption level, etc.

This may not leave too much time for the Trade and Industry to prepare for GST. However, if the legislation fails  to enter the statute book by appointed time frame, it may obstruct the Government's 'victory' and 'triumphant march' towards economic progress. The Government now needs to devise a persuasive but effective strategy if they actually plan to convert their words into action.

“GST, if not today, tomorrow it has to be approved, we are just going through the agony prior to the passage of the Bill..”

Shri. Arun Jaitley

Source: Compilation from The Economic Times, The New Indian Express, India Today and other News Columns