Centre, States Make Headway On GST, Congress Isolated On Key Demand

New Delhi: In a big step, a majority of states yesterday backed the government on key issues which have been stalling the Goods and Services Tax or GST bill, raising hopes that with greater numbers backing the bill could be taken up in the Rajya Sabha or upper house in the current monsoon session of Parliament.

At a meeting on Tuesday with union finance minister Arun Jaitley, most of his counterparts from states agreed that a cap on the rate of GST cannot be mentioned in the main bill that seeks to amend the constitution, isolating the Congress which has cited this as a key demand while stalling the legislation in the Rajya Sabha for nine months after the Lok Sabha passed it.

"As you know that no tax rates are provided in the Constitution. It was discussed and a conclusion was reached that the Union Finance Minister will communicate to other parties. He will explain it to them that it can't come in the Constitutional Amendment but it can come in the GST Bill or GST Act," said Bengal Finance Minister Amit Mitra, who heads an empowered committee of state finance ministers.

The "broad consensus put together is satisfactory to all political parties and all states," Mr Mitra, who belongs to the Trinamool Congress, said.

But Karnataka's finance minister HC Mahadevappa of the Congress said he insisted that the GST rate should be added to the constitutional amendment bill.

"There's no problem for the government to go ahead with the constitutional amendment," said Kerala's Finance Minister Thomas Isaac of the Left, which had dissented with the bill but has come around, assured that states will be compensated for five years for revenue loss from the roll-out of GST.

The bill will provide a mechanism for that it was agreed today and also that businesses of less than Rs 1.5 crore turnover will be under their administrative control and not the centre's. The centre has also had to back down on a proposed one per cent surcharge.

In parliament, a thaw between the Congress and the BJP-led government saw the two sides agree last week to block five hours to debate and pass the bill in the on-going monsoon session.

But the frost is back after the Enforcement Directorate launched an investigation against former Haryana Chief Minister BS Hooda of the Congress in the National Herald case, in which Congress chief Sonia Gandhi and her son Rahul face trial. The case has been filed by the BJP's Subramanian Swamy.

However, with the Left and most regional parties presenting a consensus on Tuesday, the government has the option to try and push the bill through the Rajya Sabha without the support of single-largest party Congress. The bill seeks to amend the Constitution and so needs two-thirds of the house to vote in its favour.

The proposed tax reform, the biggest since Independence, seeks to replace a slew of taxes and levies across the country with a unified tax regime. Analysts say GST could boost India's economic growth by up to 2 percentage points.