Finance Minister Arun Jaitley has held a series of meetings this morning with leaders of the Congress and other opposition parties, amid buzz that the Goods and Services Tax or GST bill could be presented next week for the approval of the Rajya Sabha or Upper House of Parliament.
“Talks over GST are going in the right direction,” said a top leader of the Congress, which has so far blocked the bill, cleared by the Lok Sabha last year.
Mr Jaitley has also met Left leaders and parties like the Biju Janata Dal or BJD and the Samajwadi Party. The finance minister is expected to hold an all-party meeting soon on GST.
The government has cleared substantial changes to the proposal to win support from the Congress and other parties. Based on consensus among majority states and the Congress, the cabinet has cancelled a 1% inter-state tax which had been sanctioned for states that manufacture foods.
As a national tax that replaces an intricate mesh of tariffs, the GST would earn governments revenue from consumption. So the government had planned to let production-intensive states like Tamil Nadu levy a 1% charge. The Congress has vetoed that.
In exchange for the cancelled tax, the centre will compensate states that lose revenue for the next five years – a key point made to Finance Minister Arun Jaitley at his meeting on Tuesday with finance ministers from states.
The centre has also agreed to give states more power in an independent body that would resolve disputes over revenue sharing.
For the tax reform to become a reality, the government needs not only the backing of states but also of two-thirds members in the opposition-dominated Rajya Sabha to pass a constitutional enabling amendment.
The Congress, with 60, has the maximum seats in the 243-member Rajya Sabha. It has held up the reform so far arguing that the tax rate must be capped at 18 per cent, though it has reportedly agreed that the limit need not be stated in the new law.
Regional parties like the Biju Janata Dal and the Trinamool Congress are backing the bill. The AIADMK, which governs Tamil Nadu and has 13 Rajya Sabha members, is not and government sources say they hope the party will walk out during a vote, which will help in reducing the number of votes needed for the bill to go through.
Though the government may corral together the numbers it needs, the Congress has to abstain from disruptions to allow a debate and a vote on the proposal, a cooperation it has not extended in the past
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