Prime Minister Narendra Modi met Tamil Nadu chief minister Jayalalithaa on Tuesday as finance minister Arun Jaitley pushed to build consensus over the long-pending Goods and Services Tax bill and seek its passage in the monsoon session of Parliament.
After a meeting with state finance ministers in Kolkata, Jaitley said, “virtually all states”, except Tamil Nadu, have backed the proposed national goods and services tax (GST), signaling that support may have broadened among states for India’s biggest tax reform.
In her first meeting with the PM after winning the assembly polls, Jayalalithaa placed a slew of demands and maintained that manufacturing states like Tamil Nadu should be compensated for its revenue loss under a GST regime.
The outcome of the meeting was not immediately known but government officials were optimistic that the southern state will come on board.
“Tamil Nadu has offered a few suggestions which have been noted,” Jaitley told reporters after the Kolkata meeting, which was attended by finance ministers of 22 states.
The Congress maintained that the government must take on board Opposition parties and its suggestions.
“We are not opposed to the concept of GST. We created the bill. We only want some amendments. If the government takes us and some other opposition parties on board, the GST bill can be passed in two minutes,” said Ghulam Nabi Azad, leader of the Opposition in Rajya Sabha.
Opposition parties such as Trinamool Congress, Samajwadi Party, Bahujan Samaj Party, JD(U) and Biju Janata Dal are likely to support the proposed tax. Getting the southern state on board could give the government the required strength and may force the Congress to soften its stand, say government managers.
While the Congress alone can’t stop the passage of the GST bill, government managers want to take the principal opposition party also on board as any ruckus or disruptions can prevent the passage of the Constitutional Amendment bill.
In a sign that he may have mustered enough support for the GST, Jaitley said the tax bill could be presented for approval in Rajya Sabha during the July monsoon session of parliament. The bill has already been approved by the Lok Sabha.
Azad also indicated that there will be further negotiations with the government. “The session is more than a month away. The subject is pre-matured now,” he said.
Political differences have held up the GST, with the Congress refusing to allow it through parliament unless the government agreed to cap the tax rate at 18% and create an independent mechanism to resolve disputes on revenue sharing between states.
Jaitley said after Tuesday’s meeting that the states had agreed no cap should be put on the tax rate because exigencies might arise in future to revise the rates. He has already agreed to allow states to impose a 1% additional levy on cross-border transport of goods, an idea rejected by the Congress.
Jayalalithaa also told the PM that petroleum products should be left out from the GST’s ambit.
The proposed tax seeks to replace a slew of central and state levies, transforming the nation of 1.3 billion people into a customs union. This could boost the rate of growth by two percentage points, economists say.
But for the measure to become a reality, Jaitley needs not only the backing of states but also of the Opposition to secure the required two-thirds majority needed to pass a key constitutional enabling amendment in Rajya Sabha.
The GST ministerial panel is likely to meet again in the second week of July. The government has already missed its initial rollout deadline of April 1, 2016.