The Congress-led UPA government and the main opposition Bharatiya Janata Party (BJP) on Monday took a small step towards forging consensus on introducing the country’s first ever nationwide indirect tax.
The Congress-led UPA government and the main opposition Bharatiya Janata Party (BJP) on Monday took a small step towards forging consensus on introducing the country’s first ever nationwide indirect tax. The government agreed to appoint senior BJP leader and finance minister of Bihar, Sushil Modi, as head of a panel that will look into the issues related to the implementation of the proposed Goods and Services Tax (GST).
The introduction of indirect tax is seen as a major tool for faster economic growth in the third largest economy of Asia. The Union government gave the go-ahead to Modi to head the panel on implementing GST that aims to improve India’s tax regime. It is the first breakthrough for the two sides in moving the stalled tax reform forward.
Prime Minister Manmohan Singh has been accused of running a ‘lame duck’ government. However, he recently won praise from investors and analysts for his bold policy decisions, including raising fuel prices to ease the subsidy burden. “It now looks as if sharp criticism has shaken them (government) out of their lethargy,” a research note by Macquarie Equities Research said of India’s government.
Since its re-election in 2009, the government has failed to make headway on GST due to opposition from some of the 28 states who fear that they will lose their fiscal autonomy.
Talking to DNA, state minister for energy, Saurabh Patel said that the existing framework of GST was not acceptable to BJP and to also non-Congress ruled states. “Today, with consensus, the decision was taken to appoint Sushil Modi as we believe he is the right person to solve pending issues of the state and the Centre,” Patel said.
The GST is intended to usher in a uniform market for goods and services, cut business costs and boost government revenues. At the moment, a manufacturer who wishes to move goods from one state to another has to struggle with a number of different taxes, as if taking goods across several countries.
The law is as much in focus for investors and the public because it shows the difficulties policymakers have in simplifying India’s bureaucratic regulatory landscape, a key obstacle to economic development.
The law needs to be approved by two-thirds of parliament and half of India’s states, hence the need for the government to seek support from the opposition.
The Congress government has in the past accused the BJP of stalling the bill for political advantage.
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