Thursday, November 26, 2015

Jaitley's last push for a GST

Winter is coming to New Delhi. With the daytime temperatures falling under 30degC and slipping into the teens at night, the capital is already shrouded in smoke from thousands of fires.

The weather may be cooling, but the temperatures are still high over at Parliament where the Government is seeking to use the 20-day winter session to push through a host of Bills to round off the year.

The ruling Bharatiya Janata Party (BJP)-led coalition is desperate to see 2015 off on a high note after controversies over the antics of some of its right-wing nationalist supporters and the mauling it took in the State election of Bihar.

The Government has a raft of Bills it wants to see passed, the jewel in the crown being the long delayed legislation to introduce the country’s first Goods and Services Tax (GST).

In Singapore on the latest of a string of overseas visits, Prime Minister Narendra Modi told potential investors that he wanted to see the GST in place by April 1 next year. His message was that despite setbacks, the economy was set to expand even faster than its current seven per cent annually.

“Runways for the take-off of the economy have been made; reforms are happening in a big way that will transform the system and help people realise their dreams,” Modi told a meeting of the India Singapore Economic Convention.

He said reforms already in place had made India the most open economy in the world.  

However, as the Prime Minister was talking up India’s prospects overseas, back home the BJP is facing an Opposition revitalised after the Bihar result and convinced that the ‘Modi Magic’ is on the wane.

The man charged with steering the GST Bill though both Houses of Parliament (Opposition parties have a majority in the Upper House, the Rajya Sabha) is the Minister of Finance, Arun Jaitley, widely considered the most capable of Modi’s lieutenants.

Jaitley has said he is willing to compromise over some aspects of the GST legislation but not over a key demand of the Opposition Congress Party that the rate be constitutionally capped at 18 per cent.

The Finance Minister has said that including a set rate as part of the constitutional amendment needed to bring the GST into law would make it unnecessarily difficult to move the rate either up or down in response to future market developments.

Because of the mechanisms needed to bring about the abolition of more than a dozen State taxes the GST will replace, it is crucial that the legislation be passed in the current session. Most commentators believe that while the Opposition may go to the wire with a number of amendments, this time the Bill will get through.

“Jaitley has thrown everything into this — it’s the biggest tax reform in India’s history,” one said. “If he can’t get it though, nobody can.” 

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