25/07/2016 1:20 PM IST | Updated 27/07/2016 11:50 AM IST

The Rajya Sabha Is Not The Biggest Hurdle Facing The GST Bill

There are positive signs on the legislative front suggesting that the Rajya Sabha may take up for discussion and debate the proposed GST Bill in the Monsoon Session 2016. The floor managers of political parties are busy trying to gain consensus so that some, if not all, of their key proposals are embedded. The government is also engaged in subtle efforts to appease the combined opposition to come to terms. This is now essential to save face in front of the nation as well as international trade organizations in general.

However, even if it is assumed that the Bill is passed in the Monsoon session of Parliament 2016, there are numerous obstacles in its final implementation. Much of the focus is on the stubborn Opposition digging in its heels in the Upper House, but there are other practical problems too that have not yet become a part of the popular GST narrative.

The Bill has to be tabled in each state legislature, debated and passed with the requisite number of votes... a herculean process.

The first hurdle after the hypothetical passage of the Bill in the Upper House is its passage by at least half of the state legislatures in the country. Following this, the Bill will be presented to the President under Article 368 of the Constitution for his assent.

Since the Bill is a Constitutional Amendment Bill, the framework of legislation clearly mandates that at least 15 state assemblies must pass the Bill after its passage in Parliament. This is a herculean process by itself because the Bill has to be tabled in each state legislature, debated and passed with the requisite number of votes. In the present situation, where the two major political parties are at loggerheads with each other in almost every state, even a single misstep leading to non-achievement of the magical number of 16 states will render the Bill dead on arrival and the Constitution and its appropriate lists in Schedule VII may not be successfully amended.

Step two of the problem is that all 29 states and two Legislative Union Territories would be required to enact the State and Central GST Bills in their legislative assemblies post recommendation from the GST council. The Constitution Amendment Bill merely allows the Centre to amend the Constitution. Since GST, as a legislation, proposes an uniform tax framework for the entire country, every state has to be on board with legislation in place for the framework to take effect. Delays in passing the state Bills by the Assemblies will slow down the progress of the entire reform as there cannot be a piecemeal implementation of this legislation.

The problem is not the passage of the Bill in the Rajya Sabha. The actual challenge lies in orchestrating a time-bound and smooth implementation.

The third critical step in the process is the formation and the operation of the GST council, which is presently tasked by draft legislation to formulate the rules, tax rates, exemptions and other bare bones of the legislation. The working pattern of the GST council, as currently envisaged, requires the complete concurrence of at least three-fourths of the states with the central government to implement the nuts and bolts of the law. Following the passing of the guidelines by the GST council, the states will be able to take up the law and pass their individual legislation to implement the framework. Given the current acrimonious political situation in the country between the ruling party and the Opposition, how smoothly this concurrence is achieved in a matter of considerable doubt.

And finally, comes the last mile of practical implementation. This requires the setting up of IT systems, training and sensitization of bureaucrats and complete revamping of the industry. In a country where the culture of red tape is supreme, this practical implementation can take a significantly long time to achieve.

So, in a nutshell, the problem is not the passage of the Bill in the Rajya Sabha. The actual challenge lies in orchestrating a time-bound and smooth implementation, on which there has been some progress, albeit not free from debate. Certainly, this cannot be logically concluded by April 2017 which is the present date set for an introduction of the Act (assuming the Bill passes in the Monsoon Session, else this entire piece is pushed back an year anyway). The earliest one can hope for a concrete legislation is in the summer of 2018, by which time the present government would have completed four years in office. Whether they will introduce a tax reform that could possibly lead to a price rise in a pre-election year is a question worth considering. For now, the fruition of the GST still seems to be a grand illusion in the velodrome of Indian politics.

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