Rajya Sabha has finally adopted a goods and services tax

Eleven years after it was first mooted in Parliament, the Rajya Sabha has finally adopted a goods and services tax. After the mere formality of its passage in the Lok Sabha for an approval of the amendments made, it will have to be considered and approved by a majority of State Assemblies before it can be sent to the President for assent. For now, Parliament’s stamp is historic as the proposed tax will alter the powers of taxation that States enjoyed under the Constitution and usher in a uniform consumption-based tax structure across the land for almost all goods and services. Only potable alcohol is proposed to be excluded from the GST’s ambit, according to Finance Minister Arun Jaitley, with petroleum products set to be pegged at a zero per cent rate till such time as the proposed GST Council reaches an agreement with the States and the Centre on an acceptable framework for taxation. That the two main players — the Bharatiya Janata Party and the Congress — were able to narrow their differences restores a degree of faith in the capacity of the political class to put the nation above petty self-serving interests. While it is a pity that consensus took so long to forge, both parties deserve a measure of credit for seeing the legislation through. The BJP for being accommodative in the face of reservations about specific provisions, which was accompanied by a much-needed change in tack in dealing with the Opposition. And the Congress, which became increasingly isolated on the issue and risked appearing cussedly obstructionist, for overcoming its desire to pay the BJP back in its own coin.

The GST will usher in a nationwide common market and subsume a multiplicity of Central and State taxes; but this is still some time and several smaller challenges away. Indeed, the Centre, the States, the yet-to-be-created GST Council and the vendor tasked with creating the IT backbone for the administration of the new tax regime have a clear challenge if they are to meet the April 1, 2017 deadline. Among the tasks ahead is the drafting of the specific Central and State GST laws that will again need to be passed in Parliament and State legislatures. Vital decisions, such as the setting of a proposed revenue-neutral standard rate, remain; these can have far-reaching cost and price implications for producers and consumers. These would also have revenue ramifications for governments. And while the Centre may be tempted to opt to speed up matters by moving the GST legislations as Money Bills to bypass any debate over specific provisions in the Rajya Sabha, it would be well-advised to avoid that path to see that the spirit of hard-won consensus is not frittered away in another round of political one-upmanship.