Uncertainty persists, but GST may eventually go through

The Constitutional amendment bill for wholesome changes in the tax rules needs to be passed with a two-thirds majority of those present and voting in both Houses of Parliament separately and must win approval from half the state assemblies.


As expectations build up for the passage of the goods and services tax (GST) bill in the second part of the Budget session of Parliament, the Congress appears to be in mood to play spoiler again.

While the government is very keen to push the bill in the remaining period of the budget session, the Congress party has clarified its stand that the party will not support the proposed legislation in its present form, sticking firmly to its demand for three changes.

The Constitutional amendment bill for wholesome changes in the tax rules needs to be passed with a two-thirds majority of those present and voting in both Houses of Parliament separately and must win approval from half the state assemblies.

The arithmetic in the Upper House shows that the BJP-led National Democratic Alliance won’t be able to get the 122nd Constitution Amendment Bill passed without the support from the opposition Congress party even after August, by when 30 per cent of the seats will be filled with new members.

The BJP insists that it will keep trying to convince the opposition so as to ensure passage of the legislation in second part of the Budget session beginning April 25.

The Congress has essentially caveated its support to the Bill by reiterating its three demands. Some analysts say the NDA may go along and find common ground, except for one of the three conditions, which is an 18 per cent cap on the tax rate.

The Modi government is keen on pushing ahead with its plans for landmark tax reform measures despite the political opposition it has been facing. The GST is estimated to affect between 2 to 2.5 million excise and service tax payers and result in dramatic changes in the Indian tax system.

The GST legislation can be a big positive for companies focused on the domestic economy. Manufacturing-linked sectors like capital goods, auto, auto components, infrastructure, cement and various consumption-linked sectors like FMCG, white goods makers, electronic hardware, software, telecom manufacturing and mining will benefit from a positive outcome on the GST legislation, which will lead to a new indirect tax regime in the country by doing away with multiple taxation at various levels.

The rollout of the GST regime was scheduled for April 1 this year. The legislation has already been passed by Lok Sabha. But then it got stuck in the Upper House of Parliament, which is the Rajya Sabha, where the ruling party does not have a majority. The House referred the bill for scrutiny by a select committee of Rajya Sabha, whose report was to tabled during the monsoon session last year.