Fresh hope for GST as Congress shows flexibility on rate cap

Speaking at a debate on a TV channel, Congress leader Kamal Nath indicated that the party is flexible on its demand to capping the tax rate under GST in the constitution amendment bill

New Delhi: The willingness of the Congress to reconsider its demand to cap the goods and service tax (GST) rate in the proposed constitution amendment bill has raised some hope of an end to the deadlock on the bill’s passage in the Rajya Sabha.

The Constitution amendment bill required for the roll-out of GST is pending in the Rajya Sabha with the Congress insisting that its three demands be incorporated in the bill in return for its support.

The party has demanded that the 1% additional levy on supply of goods and services should be done away with. It also favoured the tax rate to be capped at 18% in the Constitution amendment bill itself and sought an independent dispute resolution mechanism for settling disputes between states.

The Centre has indicated that it is willing to consider some of the demands of the Congress but has so far been unable to get the bill passed in Parliament. It was initially expected that the bill will be passed in the monsoon session of Parliament last year and GST will be rolled out by 1 April 2016.

If there is an agreement between the principal opposition party and the government, the bill could be passed in the upcoming budget session of Parliament beginning in February, which could result in GST being rolled out from any month in 2016-17.

Speaking at a debate organized by NDTV at Davos on Wednesday, Congress leader Kamal Nath justified two of Congress party’s demands and indicated that the party is flexible on its demand to capping the tax rate under GST in the constitution amendment bill.

“Why should you have an additional 1% levy on inter-state movement of goods. The second thing is the cap on rates. I hope they (the government) do say that I accept the cap but lets not have it in the Constitution. That means the only issue will be how it should be framed,” he said.

“If there is a dispute between states, you can’t have the same council of states (deciding on the levy). We should have a satisfactory dispute resolution system,” he said.

Responding to Nath’s statement, finance minister Arun Jaitley said that GST is originally a bill of the Congress party, but termed the demand on capping the rates in the Constitution amendment bill as preposterous.

“RNR (revenue neutral rate) that the government suggested is 15-15.5%. No tariff can be perpetual. If volumes increase, it can go down. In a crisis, it can go up. None of your finance ministers (Pranab Mukherjee and P. Chidambaram) proposed it. How can we go every time to the states if we want the interest rates to be raised,” he said.

“I am willing to go back to the manufacturing states for the 1%. On dispute resolution, what I have done is what Chidambaram has noted in the file,” he said.