There seems to be an all-party consensus on major contentious issues relating to the jumbo indirect tax reform. The proposal of 1 percent inter-state levy that would have negated the benefits of a uniform tax regime has been dropped. The states have been promised with full compensation for likely losses in the first five years and both the Congress party and BJP have largely agreed to accommodate the GST rate in the Bill and not in the constitution to legally ring-fence the rate.

There was also broad agreement on the principle that the ordinary businessman and the common tax man will benefit from introduction of GST by way of lower tax rates while the states will not face any loss of revenue, West Bengal Finance Minister and the panel chairman Amit Mitra said

"As you know that no tax rates are provided in the Constitution. It was discussed and conclusion reached that Union Finance Minister will communicate to other parties. He will explain it to them that it can't come in Constitutional Amendment but it can come in GST Bill or GST Act," Mitra said.

“All states were of the view that the tax rates put forward by the Chief Economic Advisor are not acceptable. There was no consensus on what the rate should be," Kerala finance minister Thomas Isaac said.

With the Congress easing up, the politics of GST is almost reduced to the remaining few dissenters such as J Jailalithaa’s AIADMK and BSP. The Left parties, who had earlier disagreed with the Bill, seem to have returned to the consensus path. Most other regional parties are on the pro-GST side.

Given that there are major changes done in the Bill, it has to again go back to the Lok Sabha after the Upper House passes it. Passing the GST hurdle will significantly help to address India’s reform-jinx and help the country consolidate its position among emerging economies, offering clarity on the tax regime to the investors. GST is only a beginning step in the long road to reform overhaul.

By Premji