Tax & Accounting Blog

India’s Winter Session Will Help Determine the Future of GST

Blog, Federal Tax, Indirect Tax, Sales and Use Tax December 3, 2015

Soon the winter session of Parliament begins in India. This marks another opportunity for the right-wing Bharatiya Janata Party (BJP) to break the current GST deadlock. To break the deadlock, the BJP will need to convince the Upper House of Parliament to pass the Constitution Amendment Bill.

The Constitution Amendment Bill is a precursor to the GST Bill and its purpose is to pave the way for a Goods and Services Tax in India. By passing the Amendment Bill, Parliament would be signaling that there is enough support in India’s government to implement GST.

The BJP is optimistic. They believe they have a chance to pass the Constitution Amendment Bill during the winter session and then implement GST as soon as April 1st of next year. Meanwhile, there is a growing trend within India that has seen states come out in opposition to the BJP. This happened most recently in the state of Bihar, where a political party known as the Rashtriya Janata Dal party (RJD) just won 80 legislative assembly seats during the recent October-November elections while the BJP secured just 53 seats.

The election results in Bihar do not bode well for the BJP’s agenda. The RJD was formed in the late 1990’s as part of a coalition with an explicit “anti-BJP” platform. Now, having captured 80 seats on the state legislature, the RJD’s presence in Bihar will have an immediate impact at the national level. In India members of the Upper House of Parliament are elected by state legislatures. So, more RJD party members in Bihar’s legislative assembly will translate into more BJP opposition in the Upper House – the one place where the BJP cannot afford to face more opposition if it plans on passing the Constitution Amendment Bill.

The situation could get even worse for the BJP. If opposition party momentum continues to build in India, as many believe it will, then government support for GST will naturally decline as a result. In that case, what we are seeing right now in India — states pushing back against the idea of a GST rather than embracing it — may not just mean that implementing GST becomes harder. Implementing GST may eventually become impossible.

The winter session runs November 26th through December 23rd. I will continue to post blog articles on this topic as more information becomes available.