The new GST test

Non-BJP states now have enough muscle to block resolutions

The recently concluded elections in five states will likely show their first impact on policymaking when the Goods and Services Tax (GST) Council meets on December 22. The Council will see the entry of three new faces — all from the Congress. From the perspective of decision making in the GST Council, it is possible now to conceive of a situation where the non-BJP ruled states block a GST resolution that the BJP-ruled Centre and states hope to pass. This then is both a test as well as an opportunity for the BJP-ruled central government both in terms of managing the Indian federal structure as well as fostering co-operative federalism, a phrase that Prime Minister Narendra Modi has repeatedly stressed. How the BJP and its top leadership handle this challenge could well define not only the shape and form of reforms in the GST but also the acceptability of such changes.

To be sure, any decision in the GST Council requires 75 per cent votes to get approved. The Council has representation from the Centre, the 29 states as well as from Delhi and Puducherry. However, the Centre’s vote has 33.3 per cent weight and that means it has veto powers over any decision. However, to get the Council’s approval on one of its own resolutions, the Centre needs the backing of 20 states to cross the 75 per cent vote mark; each state has roughly a 2.15 per cent vote share. Before the election results of December 11, the BJP could bank on the 16 states it ruled, as well as the four where its allies were in power, to reach the magic mark of 20. After the results, the tally of the BJP and its allies is down to 17. As a result, it needs the support of at least three more states now ruled by the Congress and other opposition parties. The Congress has six states under its rule, and all but one (Tamil Nadu) of the seven other states have publicly taken a strong anti-BJP stand. Jammu & Kashmir is under Governor's rule. More worryingly, if any 12 of these 13 states come to a consensus, they could effectively veto any decision arrived at by the Centre and the rest of the states ruled by the BJP or its allies.

To date, the GST Council has taken all its decisions — almost a thousand — by consensus and has quite remarkably avoided the need for a division of votes, even though several of the decisions were highly sensitive or dealt with emotive issues. That can change as the opposition has enough muscle now to block the ruling party. Already, the new chief minister of Madhya Pradesh has said the party “will campaign against the kind of GST” the prime minister has brought in. That means the BJP has to be more tactful and may have to concede some ground in order to keep the spirit of cooperative federalism alive. The challenge the party faces was on full display on Tuesday evening when two finance ministers of opposition-ruled states “took exception” to the prime minister’s hint earlier in the day that “99 per cent of things” would be brought under the sub-18 per cent GST slab soon. This is despite the conventional wisdom that fewer effective slabs would be a welcome move, as it would fix the design flaws in the GST structure. Politicking is something the GST Council can ill afford.