The Bihar assembly elections result is a setback for the BJP-led central government’s plans to pilot the Goods and Services Tax (GST) Bill through parliament, an expert said on Sunday.
"The opposition parties will become emboldened with the Bihar elections result, which will make it more difficult for the (Narendra) Modi government to go through with the GST Bill," economist Arun Kumar, till recently a professor at Jawaharlal Nehru University here, said.
In Bihar, the Grand Alliance of Chief Minister Nitish Kumar’s Janata Dal-United, Lalu Prasad Yadav’s Rashtriya Janata Dal and the Congress was poised to win 161 seats in the 243-member assembly.
The GST seeks to create a single Indian market by subsuming most indirect taxes levies of the central and state governments, such as excise duty, service tax and value-added tax that is seen as facilitating tax compliance, and curbing inflation through better supply chains.
The central government has set the target for its implementation from April next year, but it is currently stuck in parliament, especially over the cabinet’s nod to some changes recommended by a parliamentary panel, notably an extra one percent levy to compensate the states for potential tax losses.
"The Bihar results will also be a shot in the arm for dissenters within the BJP, while the government would henceforth be less one-sided and more willing to compromise on GST and other contentious legislation," Arun Kumar said.
Pointing out that differences on the GST bill were less over fundamentals and had become more a matter of scoring political points, Arun Kumar said a compromise was possible.
"The government will be willing to compromise, even on other major economic legislation like the Whistleblowers Bill for protecting informants, which the government was trying to dilute protection provisions. This is better from the governance perspective," he said.
The opposition has been against the extra 1 percent GST levy as they feel this would not only push up prices, but also have a cascading effect.
In this regard, the Confederation of All India Traders (CAIT) has appealed to Finance Minister Arun Jaitley to withdraw the proposed additional tax.
"Levy of 1 percent additional tax on inter-state trade will certainly lead to distortion in GST and will have cascading effect," CAIT president B.C. Bhartia and secretary general Praveen Khandelwal have said in a joint statement.