Pranab gives up on GST by April

Political pressures force delay in tabling Bill.

Bharatiya Janata Party-ruled states, along with Tamil Nadu and Uttar Pradesh, have forced the Centre to defer implementation of the goods and services tax (GST) to beyond April.

Two days after these states sought more time to study the draft constitutional amendments for the rollout of the biggest indirect tax reform in the country, Finance Minister Pranab Mukherjee today privately conceded that the implementation date would be missed. He said it was pointless to introduce the Bill in Parliament when there was no consensus among state governments on the issue.

Government officials said the Centre and state governments could consider implementing GST from October 2011, if everyone was on board. The government will now come up with a third revised draft to address the remaining concerns of the states. Senior government functionaries said Mukherjee discussed the matter with Prime Minister Manmohan Singh and decided not to press ahead with the constitutional amendment at this time.

“Why should I waste my time and energy, when (the Bill) is bound to collapse?” Mukherjee is understood to have remarked behind closed doors today. Another UPA manager pointed out that introducing legislation at this stage would appear as if the Centre was forcing it upon state governments, which could make them even more intractable.

Mukherjee’s despair stems from fact that the BJP took a U-turn and now opposes the Bill because of political pressures. Initially, a large number of states, including some ruled by the Congress, had objected to the Centre’s move to give the Union finance minister veto powers. Mukherjee, however, retracted and deleted the contentious provision. He also softened his stand on other contentious issues.

But that was not enough to convince all the states. At a meeting with Mukherjee on Wednesday, they sought another month to go through the fine print of the draft amendment, while some raised fears of losing autonomy, both seen as delaying tactics.

The Finance Minister, in a debate on the price rise, had told the Lok Sabha two weeks ago that if the GST Bill is not introduced in the current session, there was virtually no hope for its implementation in April 2011. After the Bill is introduced, the Parliamentary Standing Committee is required to submit its recommendations. The government was targeting the winter session (November-December) to get Parliament's assent. Subsequently, at least 15 states have to ratify the Bill in their assemblies by March to allow the government to implement the GST regime from April.

After struggling with the GST for the past four years, the Congress, in its election manifesto for the 2009 Lok Sabha elections, had promised to implement it from 2010. Now, the ruling party is set to miss yet another deadline.

TIMELINE
THE YEAR 2010 FOR GST

Apr 1: Original deadline for GST introduction missed

Jul 21: Centre suggests GST rates; shares draft with states

Jul 4: States oppose proposal to give Union FM veto powers

Aug 13: Centre sends revised draft to states, drops veto

Aug 18: States seek one month’s time to review revised draft

Mukherjee admitted that the latest veto from the BJP — the principal Opposition party — came as a bolt from the blue. Just before the Parliament session started on July 26, Mukherjee had held a luncheon meeting with Sushma Swaraj and Arun Jaitley, Opposition leaders in the Lok Sabha and Rajya Sabha, respectively, and veteran BJP leader L K Advani.

At that meeting, the three leaders agreed on the need for GST and asked Mukherjee place the Bill on GST in the current monsoon session’s agenda.

Among all the BJP-ruled states, only two — Uttarakhand and Madhya Pradesh — had initial reservations about the draft Bill. Finally, the BJP decided against forcing its state governments to support the GST. Uttar Pradesh — ruled by Mayawati’s Bahujan Samaj Party — also objected to various provisions of the GST.

The central leadership of the CPI (M), another Opposition party that has three state governments under its command, has pledged support. But the government cannot ratify the Bill without the BJP on board. Mukherjee said efforts would continue to convince the BJP and evolve a consensus on the issue.