The Big Story

Mission impossible

The wait for the GST regime is going to be a long one and politics, not financial statesmanship, will determine its course 

Major economic reforms cannot happen if the political realities that surround them are not in sync. The same irrefutable logic holds good for the long-awaited goods and services tax (GST) regime, which will usher in comprehensive indirect tax reform in the country. The target was to introduce GST from April 1, 2010, and this was announced in the FY08 Union Budget. Two years since, however, the GST regime appears even further away.

Finance minister Pranab Mukherjee certainly wants to herald the GST era and his latest Budget moves in that direction — in fact, he speaks of drafting the model legislation for Centre and state GST in concert with the states, and says that this is in the works. The FM even talks of an operational GST Network by August this year. But this doesn’t mean that the GST regime will be implemented by, say, April 2013. Direction apart, there’s no timeframe for GST implementation in the Budget. 

The fact is, GST cannot take off till there is a constitutional amendment so that taxation will come into the concurrent list. The 115th Constitution Amendment Bill 2011, introduced in March last year, is still with the Standing Committee on Finance. Besides, there have been constant parleys since 2007 between the Centre and the states; many hurdles have been removed but some still remain, especially with the Opposition (particularly BJP-ruled states) continuing to voice concern over compensation issues and the loss of fiscal autonomy. “The Centre has not been reaching out to the states to address their apprehensions and concerns,” says Sushma Swaraj, Opposition leader in the Lok Sabha. The political scenario is also changing now that the 2014 general elections are not too far away. So, forget the current fiscal, the question now is whether the UPA government will be able to implement GST during its tenure at all. 

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