India's finance minister to seek opposition support for Goods and Services Tax bill

The government has not yet mustered the two-thirds majority needed for a key amendment to enact the GST bill. Photograph:( Reuters )

Reuters New Delhi, India Jul 25, 2016, 03.41 PM (IST)

Indian finance minister Arun Jaitley will meet state ministers on Tuesday to put pressure on the opposition Congress party to back a long-delayed sales tax reform whose chances have again been thrown into doubt by a parliamentary standoff.

The proposed tax reform, the biggest since India's independence from Britain in 1947, seeks to replace a slew of central taxes and levies in its 29 states, transforming the nation of 1.3 billion people into a customs union.

The current monsoon session of parliament could be the best chance for Prime Minister Narendra Modi's government to adopt a landmark Goods and Services Tax (GST) before campaigning hots up for state elections next year.

"The meeting will discuss all pending issues on GST," said finance ministry spokesman D. S. Malik. "Later, the government could decide a further course of action."

Yet Congress has been angered by a central investigation launched last week against one of its former state chief ministers over a case in which party chief Sonia Gandhi and her son and heir apparent, Rahul Gandhi, already face trial.

Both have denied accusations of misuse of party funds, in the case brought by Subramanian Swamy, a senior politician in Modi's ruling party, over property owned by a defunct party newspaper.

"I don't think the Prime Minister and his government are sincere about any constructive cooperation," Anand Sharma, a senior Congress lawmaker in the upper house of Parliament, Rajya Sabha, told the Indian Express newspaper.

"And in this vitiated environment, there is no cooperation possible between the Congress and the government," Sharma said, in comments echoed by senior party sources to Reuters on Monday.

With 60 members, Congress is the single largest party in the Rajya Sabha, whose members total 245. With the support of allies and a few regional parties that oppose the bill, it reckons the government cannot muster the two-thirds majority needed for a key amendment to enact the GST.

Modi's party, which lacks a majority in the Rajya Sabha, had reached out to Congress to end its opposition to the GST bill, stalled in parliament for years.

Congress signalled until last week it could support the GST bill if the government agreed to cap the tax rate at about 18 per cent, even if this was not initially anchored in the law.

Jaitley has resisted capping the tax rate, winning backing from a growing number of state governments, and still hopes to pass the GST measure in the monsoon session that ends on August 13, and turn India into a single market for the first time.