Congress rebuffs Delhi's 'GST breakthrough' claim

Govt had said earlier it accepted demands made by opposition party to back tax reform

NEW DELHI • India's Congress party yesterday rebuffed suggestions of a breakthrough on a landmark tax reform, hours after the government said it had accepted the demands set by the main opposition party to back the measure.

The proposed Goods and Services Tax (GST), India's biggest revenue shake-up since independence in 1947, seeks to replace a slew of federal and state levies, transforming the nation of 1.2 billion people into a customs union.

Supporters say the new sales tax will add up to two percentage points to the South Asian nation's economic growth.

The Congress party, the original author of the tax reform, has opposed what it calls the "flawed" version now before Parliament, where it has been able to block a key constitutional enabling amendment in the Upper House.

"The government is using optics of meetings and is not serious about GST," Mr Kapil Sibal, the Congress point person for the tax reform, told reporters.

His comments came after Parliamentary Affairs Minister Venkaiah Naidu said the government had agreed to the opposition party's demands.

He also said the government was willing to bring forward the next Parliament session to pass the proposed GST Bill if Congress backed the measure.

The minister met Congress chief Sonia Gandhi yesterday to convey the government's decision. However, Mrs Gandhi did not assure him of her party's support.

"Sonia said they (Congress) will discuss among themselves and take a final decision," Mr Naidu said.

But Mr Sibal said the party was still waiting for written proposals from the government.

Congress wants the government to cap the GST rate at less than 20 per cent, scrap a proposed state levy and create an independent mechanism to resolve disputes on revenue-sharing between states.

The political slugfest between the two sides has ensured that Finance Minister Arun Jaitley's self-imposed deadline of April 1 for the GST's launch will be missed.

While Mr Jaitley has yet to set a new date for the roll-out, aides say passage of the constitutional amendment Bill in next month's Budget session of Parliament would allow them to implement it by October.

Yet even that deadline, which would fall in the middle of the tax year, appears optimistic, say economists.

"There is still a substantive legislative process that has to be completed," said Ms Aditi Nayar, an economist at ICRA, the Indian arm of ratings agency Moody's.

Before the winter session of Parliament ended last month, Mr Jaitley had indicated that the demand to scrap the state levy linked to GST was "fair and arguable" and he was ready to compensate states if cancellation of the levy resulted in revenue losses for them, reported the NDTV news portal.

"This 1 per cent (levy) issue is resolvable," he said at a meeting of business chambers.

Mr Jaitley has also said that standard rates under the new tax regime would be less than 18 per cent, which would address the Congress' concerns that a higher rate would be inflationary, make businesses uncompetitive and encourage tax evasion.

REUTERS

A version of this article appeared in the print edition of The Straits Times on January 08, 2016, with the headline 'Congress rebuffs Delhi's 'GST breakthrough' claim'. Print Edition | Subscribe