A uniform nationwide goods and services tax, the country’s most ambitious economic reform in the making, is staring at fresh hurdles as the Congress has demanded more changes that run contrary to its earlier stance.
The party is yet to finalise its stand on the goods and services tax (GST) bill but sources said it will not allow Parliament to function at all in the monsoon session, which will block the passage of all pending bills moved by the Modi government.
“We want a good GST bill, not a fraud bill,” Congress leader Jairam Ramesh said on Tuesday. While the government is keen to roll out the new tax regime from April 1, 2016, the Congress is quick to point out that during the UPA government’s tenure a BJP-headed parliamentary committee took two years to submit a report on the bill, which derailed the whole GST plan.
The government faces a challenge in getting the constitutional amendment bill enabling the GST passed in the Rajya Sabha, where it is in minority, and getting it ratified by a majority of states.
The Congress wants the GST rate capped at 18% and specified in the bill itself and removal of the “entry tax” of 1%. The latter is proposed for a maximum period of two years as additional revenues for producing states.
It also wants tobacco and electricity surcharge kept within the GST, a move that will deprive the states of extra taxes from two major revenue sources.
In addition, the Congress wants a clear dispute redress mechanism as it feels the GST council is not equipped to handle conflicts. It also wants the compensation formula in the amendment bill itself.
Senior party leaders Ghulam Nabi Azad, Ahmed Patel and P Chidambaram recently met to discuss the bill. Earlier, it was discussed at a meeting of Congress chief ministers. The amendment bill passed in the Lok Sabha in May did not specify rates. According to the proposed legislation, the rate is to be decided by a GST council headed by the Union finance minister with state finance ministers as members. Finance minister Arun Jaitley has said the new rate will be much lower than 27% that states are said to have been pushing for. But the 18% cap proposed by the Congress will likely run into stiff opposition from states and further delay the roll-out.
A section of the Congress is of the view that as the bill is a UPA project, party members may walk out of Parliament if the demanded amendments are not made.
The new regime, if implemented, will replace a string of central and local levies such as excise, value-added tax and octroi with a single unified tax and stitch together a common national market.