Pranab woos BJP on GST; talks amiable

To garner Opposition support on the Goods and Services Tax (GST), Finance Minister Pranab Mukherjee today invited three top Bharatiya Janata Party (BJP) leaders — LK Advani, Sushma Swaraj and Arun Jaitley — to lunch.

“Almost 95 per cent of the discussion was on how to make the rollout of GST more palatable. Although only 5 per cent of the time was spent on the issue of truncating the tax holiday offered to Himachal Pradesh and Uttarakhand (both with the BJP), we raised the matter firmly,” said one of the leaders who attended the lunch meeting.

The BJP was tempted to use the GST issue as one of curtailing the autonomy of states, but ultimately there was agreement that the matter was not a political one, sources said.

“Broadly, there are two kinds of states – those that are affluent, where the pattern of consumption is high and those which have large reserves of minerals but are poverty-stricken and where consumption is low. GST will help the former category of states earn more money. But the latter category, while being affluent, will have low-end point consumption and will not be able to collect GST in proportion to its riches,” said a leader.

Tamil Nadu, which entered the GST debate late and Madhya Pradesh, which fears it will be dealt an unfair hand when GST is rolled out, are the most vocal opponents of the new rationalised tax. Tamil Nadu is an ally of the United Progressive Alliance (UPA).

States including Chhattisgarh, and Madhya Pradesh (both BJP-ruled) and Orissa (NDA-ruled) are opposing GST. Several Congress-ruled states, including Jharkhand, are also opposing it for the same reason – that it will give them the thin end of the tax wedge.

The BJP asked the finance minister to continue in his efforts to build consensus around the issue. However, the party brass told Mukherjee it strongly disagreed with the budget proposal to end the tax holiday given to Uttarakhand and Himachal Pradesh.

“This (ending the tax holiday) is not a demand being made by developed states. Nor is there a flight of capital from these states. But it certainly is a disincentive for fresh investments, and will halt the industrilialisation of these states,” the BJP leaders told Mukherjee.