GST Bill: How PM Narendra Modi pulled off his biggest reform yet

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New Delhi | Updated: August 10, 2016 10:24:03 AM

By abandoning confrontation and seeking consensus, Indian Prime Minister Narendra Modi has pulled off his biggest reform yet, securing the unanimous support of both houses of parliament for a planned Goods and Services Tax (GST).

Here's a timeline of how Modi and Finance Minister Arun Jaitley first brought India's federal states on board, before finally closing the deal at a series of meetings with an opposition Congress party that had become increasingly isolated. (Reuters)Here’s a timeline of how Modi and Finance Minister Arun Jaitley first brought India’s federal states on board, before finally closing the deal at a series of meetings with an opposition Congress party that had become increasingly isolated. (Reuters)

By abandoning confrontation and seeking consensus, Indian Prime Minister Narendra Modi has pulled off his biggest reform yet, securing the unanimous support of both houses of parliament for a planned Goods and Services Tax (GST).

Here’s a timeline of how Modi and Finance Minister Arun Jaitley first brought India’s federal states on board, before finally closing the deal at a series of meetings with an opposition Congress party that had become increasingly isolated.

May 19 – Congress, which suffered its worst-ever election defeat at the hands of Modi in 2014, is punished by voters in a round of regional elections.

June 11 – Further losses in elections to the upper house mean that Congress and its fellow holdout, Tamil Nadu’s ruling party, would struggle to muster the one-third of votes needed to stop a constitutional amendment to enable the GST.

June 15-16 – Jaitley wins the full support of West Bengal, a key swing state. Congress’s anti-GST front is crumbling.

July 15 – Jaitley holds formal talks on the GST with Congress party negotiators for the first time in nine months.

July 17 – At an all-party meeting, Modi urges opposition parties to put national interests above all else and back the GST bill.

July 19 – Jaitley holds a second round of talks with Congress. He also meets Bihar Chief Minister Nitish Kumar, who rules in an alliance with Congress. Kumar is placated by a government offer to delay a controversial piece of legislation and his party publicly backs the GST the next day.

July 26 – Jaitley offers to compensate states for five years for all revenue losses arising from the GST. The states are fully on board.

July 27 – Congress proposes tweaks to the GST amendment. They are approved by Modi’s cabinet that evening.

July 28 – Two more meetings are held but Jaitley resists a Congress demand to anchor the GST rate at 18 percent.

Aug 1 – Congress tells Jaitley it will back the bill.

Aug 3 – The constitutional amendment bill passes the upper house, with 203 votes in favour and none against, after lawmakers from Tamil Nadu walk out.

Aug 8 – The lower house unanimously approves the amendment.

WHAT HAPPENS NEXT

– At least half of India’s states and self-governing union territories need to back the GST amendment.

– The GST Council, a forum bringing together the centre and the states, should draft the key terms and scope of the GST. The government’s chief economic adviser has recommended a main rate of 18 percent, but many states want it to be higher while Congress wants it to be capped.

– Two new GST bills are expected to come before parliament in the winter session that begins in November. The states, too, are required to pass their own GST bills.

– The government targets a GST launch date of next April 1, the start of India’s financial year, although experts say that deadline is likely to slip.

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