In the biggest tax reform since 1991, the Parliament unanimously voted for the Goods and Services Tax (GST) bill giving it a thumbs up. Prime Minister Narendra Modi celebrated the victory calling it a win for Indian democracy.
Speaking at the Lok Sabha during the debate on the 122nd Constitutional Amendment Bill, Modi said, "There has always been a debate on who gave birth to Krishna and who brought him up. This is not a victory of any party. This is a victory of Indian democracy. This could not be done because of participation of earlier government and this government." Comparing the passage of the GST with the August Kranti movement, Modi said, "Today is the day of August Kranti. On August 9, freedom fighters faced torture. We will remember this day as the GST will also make people free from tax terrorism."
Touted the biggest financial reform since the economy opened up 25 years ago, the bill is expected to improve the ease of doing business in the world's fastest-growing major economy and lower prices of many commodities. The proposed levy will be a single tax to cover all levies at the Centre and state level, including entry tax and cut through the maze of indirect taxes that hampers free movement of goods and discourages investors. It is also expected to lower the burden on consumers and add 1-2 percentage points to the national GDP. It will help curb tax evasion and usher in transparency and should convert into revenue gains for the Centre and states.
Modi called the bill a "Great step towards Transformation" and a "Great step towards transparency". After being stalled in the Rajya Sabha since quite some time, the GST finally brought the BJP and the Congress together in a rare show of strong bipartisan convergence. There were several dramatic moments including a face off between Finance Minister Arun Jaitley and his Congress predecessor P Chidambaram. The latter sought a categorical assurance that subsequent GST-related bills would not be introduced as money bills, a parliamentary device that does away with the need for Rajya Sabha's approval. Jaitley responded by saying that state finance ministers from Congress-ruled states would be part of the process to finalise a GST rate and draft bills.
No party opposed the Constitution amendment and AIADMK was the sole entity to express its dissatisfaction and stage a walkout. The GST bill was approved by a 203-0 vote with a lack of fuss that belied the long drawn negotiations and acrimonious exchanges that saw it being stalled in Parliament. The next steps require sustained efforts as 50% of states must approve the legislation. The setting up of the GST council is a vital element as the entity will determine the GST rate and institute a dispute resolution mechanism.
While the rollout date of April 1, 2017 seems daunting, the government must reach a consensus on the rate which does not hurt consumers but also protects the revenue needs of states and is also non-inflationary. Congress's demand to cap the rate at 18% is a political challenge as the party argues that this protects the interests of the poor.
