Goods and Service Tax – a political timeline

RSTV Bureau
FILE: New Delhi: President Pranab Mukherjee arriving in a buggy  to address the joint session of Parliament on the first day of Budget session in New Delhi, Jan 31, 2017. Photo - PTI

FILE: New Delhi: President Pranab Mukherjee arriving in a buggy to address the joint session of Parliament on the first day of Budget session in New Delhi, Jan 31, 2017.
Photo – PTI

Within hours from now, Prime Minister Narendra Modi will unveil India’s new tax regime – the Goods and Services Tax (GST). It will be launched nationwide this midnight from the Central hall of Parliament. As a Chief Minister of Gujarat, Modi had strongly opposed the GST bill brought in by then Congress-led UPA government at the Centre.

While, President Pranab Mukherjee, who had originally moved the Constitution Amendment bill for bringing GST way back in 2011 as a finance minister in the previous UPA regime, will be present, principal opposition party – Congress — will not be attending the event in protest.

First to announce their boycott of event was Mamata’s Trinamool. Left, RJD, DKM too decided not attend the special function. Meanwhile, Nitish Kumar-led JD(U), which is also backing NDA’s Presidential candidate Ram Nath Kovind, will be attending the event.

rajiv-gandhi-1Termed ‘One Nation, One Tax’, the move overhauling and unifying India’s thus far tax structure has been through a 17 years tumultuous political pushes and pulls.

The proposal to overhaul tax structure was first sought in 1986 by VP Singh, who was then Union Finance minister in Rajiv Gandhi government.

After 14 years, Prime Minister Atal Bihari Vajpayee introduced the concept in 2000, setting up a committee headed by the then West Bengal Finance Minister Asim Dasgupta to design a GST model.

However, the term GST appeared for the first time in any Budget speech on February 28, 2006. Then Union Finance Minister P Chidambaram had set an ambitious April 1, 2010 as deadline for GST implementation.

Soon after an Empowered Committee of State Finance Ministers was constituted, which submitted its report on April 30, 2008, titled ‘A Model and Roadmap Goods and Services Tax (GST) in India’.

Former Finance Minister and senior Congress leader P Chidambaram in Parliament House on on 31 January 2017.

Former Finance Minister and senior Congress leader P Chidambaram in Parliament House on on 31 January 2017.

Post the return of Congress-led UPA government in 2009 General Election, then Union Finance minister Pranab Mukherjee announced the basic structure of GST in November. He had also set April 1, 2010 deadline. But that soon had to be deferred for an year after BJP, then in Opposition, objected to the basic structure.

But the UPA government kept pushing the new tax regime proposal. On March 22, 2011, it tabled 115th Constitution Amendment Bill in the Lok Sabha for bringing GST. The Bill was referred to Parliamentary Standing Committee on Finance led by Yashwant Sinha.

Soon the bill began to stare a deadlock. In November 2012, P Chidambaram was back as Finance minister after Pranab Mujherjee went to Rashtrapati Bhawan. He held meetings with state finance ministers with an agenda to resolve all issues by December 31, 2012 for GST rollout. But it got stuck again.

In the following year’s General Budget speech, Chidambaram declared UPA government’s resolve to bring in the tax reform. He announced the provision for Rs 9,000 crore to compensate states for losses incurred because of GST.

But the bill was strongly opposed by Modi, who was then the CM of Gujarat. Opposing the centre’s move, he had cited that state would incur losses worth Rs 14,000 crore every year due to GST. Even the state governments of Congress-ruled Maharashtra and Kerala had apprehensions about the GST.

The bill kept hanging and finally lapsed in May 2014 after dissolution of Lok Sabha.

PM-Modi-at-ParliamentBut the course of the bill took another turn on December 18, 2014. As a Prime Minister Modi pushed for the bill and his cabinet approved 122nd Constitution Amendment Bill to GST and next day it was introduced by Union Finance minister Arun Jaitley in the Lok Sabha.

Roles reversed, now the Congress, in opposition objected to the bill.

The challenge to Modi government’s deadline of April 1, 2016 for GST rollout came from the Upper House, where the ruling party and its allies lacked sufficient numbers. But the bill was passed in Lok Sabha amid Opposition protest on May 6, 2015 for BJP had numbers on its side.

A week later on May 12, the GST Amendment Bill was presented in the Rajya  Sabha, where Congress demanded the Bill be sent to Select Committee of Rajya Sabha. Even though the Bill was forwarded to joint committee of Rajya Sabha and Lok Sabha, the government failed to win the support of Opposition parties to pass the bill in Upper House.

18 percent cap on the GST, deletion of the provision of 1 per cent additional tax and an independent mechanism to resolve disputes and disagreements between the state and the Centre and within the states — were the three sticking points over which the principal opposition party blocked the GST Bill in Rajya Sabha.

FILE: File photo of Prime Minister Narendra Modi greeting Congress president Sonia Gandhi and former PM Dr. Manmohan Singh at his official residence in New Delhi. Union Finance minister Arun Jaitley and Union Parliamentary Affairs minister Venkaiah Naidu also seen.  Photo - PTI

FILE: File photo of Prime Minister Narendra Modi greeting Congress president Sonia Gandhi and former PM Dr. Manmohan Singh at his official residence in New Delhi. Union Finance minister Arun Jaitley and Union Parliamentary Affairs minister Venkaiah Naidu also seen.
Photo – PTI

But the impasse began to melt after PM Modi reached out to the top Congress leadership in November 2015.

By August 2016 and several rounds of meeting within the parties, Congress and BJP agreed to pass the Constitution Amendment Bill in Rajya Sabha. On August 3, 2016, Rajya Sabha passed the Constitution Amendment Bill by two-thirds majority and a month later on September 2 it got President Pranab Mukherjee’s assent.

GST Council, an all-party consortium, was formed soon to work out the slab rates. The council finally agreed on four slab tax structure of 5, 12, 18 and 28% along with an additional cess on luxury and sin goods.

Early this year on January 16, Jaitley announces July 1 as GST rollout deadline. On March 27, CGST, IGST, UT GST and Compensation bills were passed in both the houses of the Parliament. Till date, all states except Jammu and Kashmir had passed the SGST law.

But just ahead of the launch date, political lines are drawn again.