The Times Are a-Taxin'

Post-demonetisation, states have hardened their stances on the proposed GST. A delay is inevitable.

- Zia Haq

THE impact of one economic overhaul has rippled on to another in the making. Finance minister Arun Jaitley is now bracing for a delay in wrapping up negotiations to get going on the goods and services tax (GST), with states saying they can’t take back-to-back economic “shocks”. The idea itself doesn’t seem to be in jeopardy, though. It just might take longer and harder to strike a deal with the states, who think they have found a political opportunity in demonetisation to renegotiate the terms. Many who have otherwise been unable to drum up a serious offensive against the Narendra Modi government for triggering a currency shortage are preparing to toughen their stances.

Unlike demonetisation, the GST can’t be willed into existence by an overnight decree. It can only be achieved through agreements hammered out in hard-fought discussions.

A reform so fundamental that it requires a constitutional amendment, the GST will replace a complex patchwork of state- and local-level taxes with a single-point tax structure for all kinds of marketplace transactions.

Jaitley has all but confirmed that the Centre may miss its target of pushing through the multiple legislations needed to give effect to the GST in the current winter session of Parliament, which ends on December 16. The Opposition hasn’t let Parliament function anyway. Concluding the sixth round of talks of the GST Council—comprising Union and state finance ministers—Jaitley said he foresaw “considerable time” before everything was settled.

In all, four separate laws need to be passed for the GST to be introduced. Parliament will have to pass the central GST legislation and states need to pass their versions of the same law, apart from one integrated GST bill. Another piece of legislation that must go through provides for monetary compensation to states to make up for their initial revenue losses after the GST rolls out.