How will we explain our change of stance on GST, Congress members ask leaders

After battling the Bharatiya Janata Party government on the Goods and Services Tax Bill over the past several months, the Congress had to deal with tussle within its ranks over its decision to agree to a compromise with the ruling party on the legislation.

At the meeting called by Vice President Rahul Gandhi on Tuesday to chalk out their strategy a day before the bill is listed for discussion in the Rajya Sabha, several senior Members of Parliament and former ministers asked pointed and piercing questions on how the Congress would explain its change of stance on the GST Bill to the electorate.

On Wednesday, the Parliament will take up the Constitution Amendment Bill for consideration and passage. This is the first step towards introducing this legislation, that seeks to replace several indirect taxes levied by the Centre and state governments with one umbrella tax.

Backing down

After blocking attempts by the Prime Minister Narendra Modi’s to clear the Bill over two years, the Congress on Monday indicated that it had reached a broad consensus with the BJP on the issue. In particular, Congress had leaders objected to the party’s decision not to press ahead with its key demand of putting an 18% cap on the tax and specifying this in the Constitution.

The general refrain at the 45-minute meeting was – after we upped the ante and said we will not support the bill till our demands our met, how do we now explain this change of stance to people? How do we claim ownership of this bill?

At present, citizens pay several indirect taxes, including octroi and sales tax, apart from the direct taxes such as income tax. By bringing most indirect taxes under one umbrella levy, the GST proposes to simplify the taxation regime and its proponents have argued that it will boost growth. It was the Congress, in fact, under the United Progressive Alliance government, that had introduced the GST Bill in 2006, but it had been blocked by the BJP – Modi, in particular, who has the chief minister of Gujarat at the time.

The BJP reintroduced the proposed legislation and it was cleared by the Lok Sabha last year but was blocked in the Upper House, where the BJP is in a minority and the Congress is the single largest party, with 60 of 245 seats.

The Congress – which did not want to the credit of bringing about such a sweeping reform taken away from it – staunchly opposed the bill and was backed by the Left, AIADMK and some other regional parties in its opposition.

However, the party also came in for criticism for obstructing a key economic legislation, particularly from the industry.

Give and take

The Congress stated three prerequisites to clearing the bill: the 18% cap on the tax, waiver of an additional 1% tax to be levied by manufacturing states (which would give an advantage to BJP-ruled states like Maharashtra and Gujarat) and the setting up of an independent grievance redressal mechanism for inter-state disputes.

Of these, while the BJP has reportedly agreed to dropping the 1% levy and setting up the independent body to look into disputes, it has refused to impose a cap on the GST or mention it in the Constitution, as it would have to seek Parliament’s approval each time the ceiling needs to be revised.

It was this compromise in particular that former ministers P Chidambaram and Anand Sharma, who were deputed by the party to negotiate with the National Democratic Alliance government, had to explain to their colleagues on Tuesday.

Facing incessant questions from Congress members, the two were at pains to point out that two of their three demands have been met. However, they assured party members that they would press for the inclusion of a rate cap in the enabling legislation to make the GST into a law that will be tabled in the winter session of Parliament, if the Constutional Amendment Bill is cleared on Wednesday.

Senior leaders like Mallikarjun Kharge, Veerappa Moily and Ahmed Patel, Satyavrat Chaturvedi, Madhusudan Mistry and Viplov Thakur did not mince words in their criticism over the compromise.

While Kharge was upset that the Lok Sabha was not kept in the loop during the negotiations with the NDA government, Moily and Patel pointed to the draft bill to underline that their key demand had not been addressed. As a former chief minister (of Karnataka), Moily expressed concerned that the proposed legislation could impact states adversely.

The overwhelming view was that the Congress will fail to get any political mileage while BJP will showcase the passage of the GST Bill as a major victory for Modi and his reforms agenda.

The Congress, after being criticised for blocking the reform measure to score brownie points over its political opponent, is battling the perception that it agreed to support the bill under duress. All major opposition parties including the Trinamool Congress, the Samajwadi Party, the Janata Dal (United) and the Bahujan Samaj Party, expressed their support for the bill over the last few months.

Saving face

“This meeting should have been much earlier…the questions asked were sharp, legitimate and political. Everybody basically wanted to know how they should explain their stand on the rate cap,” said a former Congress minister.

Finance minister Arun Jaitley had held wide-ranging discussions on the GST Bill with Congress leaders on this legislation to stitch up a compromise. One of the reasons he stood firm on not specifying a rate cap in the Constitution was that the government would have to approach Parliament each time the tax rate had to be revised. The state governments have also vetoed any move to spell out a tax rate cap in the Constitutional Amendment Bill.

“We had no choice but to support the bill as almost all other parties were on board,” said a Rajya Sabha MP from the Congress.

Now, as a last-ditch attempt to retain at least some of the credit for the bill, Chidambaram, the finance minister in the UPA government, who is the Congress’ opening speaker in the debate on the GST Bill on Wednesday, is expected to underline that the tax reform legislation was the brainchild of Manmohan Singh’s government and that Modi who had blocked it at the time.

Party officials said Chidambaram is also likely to clarify that the Congress was never opposed to the GST Bill, but had serious concerns about specific provisions which had been addressed after it persisted with its demands.

Meanwhile, Sharma, who is closing the debate, is expected to explain that the Congress brought about improvements in the bill and ensured a better deal for the states.