How Congress resurgence in Hindi heartland changes dynamics of GST Council

Ruling NDA needs support of at least three non-NDA states to pass resolutions if a vote is forced; Congress FMs to call on each other before next meeting

Finance Minister Arun Jaitley’s persuasive skills will be tested at the next Goods and Services Tax (GST) Council meeting, scheduled for December 22, in which three new state finance ministers from the Congress will replace Bharatiya Janata Party leaders.

For the first time since the inception of the GST, there seems a possibility of the blocking of a resolution in the GST Council as the Opposition vote has crossed the numbers required for it. So far, all decisions have been taken by consensus, and voting has never been resorted to. The ruling National Democratic Alliance (NDA) at the Centre will now have to woo at least three states not ruled by it to get a resolution passed in the case of voting.

If there is voting, the Centre can block any proposal, since it has 33.3 per cent of the total vote. Each of the 31 governments on the Council has 2.15 per cent of the vote, since the other 66.7 per cent is equally divided between them. Since 75 per cent of all votes are needed to see through a resolution, states on their own, even if they unite, cannot ensure a resolution through on their own. However, 12 states together can block any resolution.

To get its resolution passed, the Centre will need the support of at least 20 governments. After losing three states to the Congress last week, the ruling alliance — the NDA and the North-East Democratic Alliance (NEDA) — has 17. One NEDA alliance partner, the Mizo National Front, won that state in the recent polls.

The Congress has six states under its rule. The behaviour of seven others — Odisha, West Bengal, Tamil Nadu, Andhra Pradesh, Kerala, Telangana and Delhi — will decide a resolution in the case of voting. Jammu & Kashmir is currently under Governor's Rule.

In a potential scenario, West Bengal, Andhra Pradesh, Kerala and Delhi might go against the NDA, which leaves the other three. The Centre would need the backing of all the three for a resolution see the light of day.

On the other hand, if the Congress wants to block a resolution, it needs six of the seven states not ruled by it or the NDA to come to its side. As explained earlier, it could get four of these but would still need the backing of two of the three remaining non-NDA, non-Congress states. However, the opposition can now block a resolution, which was not possible earlier. 

On Wednesday, its Madhya Pradesh chief, Kamal Nath, was quoted as saying, “We will campaign against the kind of GST he (Prime Minister) has brought in.”

Sources said Congress finance ministers will hold a meeting among themselves before the December 22 meeting. Non-political experts hope Centre and states will work together for needed changes. "With the new faces in the GST Council, there could be new ideas and thoughts. The bigger question remains how the political parties will work together, to provide the much-needed relief for the business community," said Abhishek Rastogi, partner at Khaitan & Co. 

He felt the Council might have to resort to voting on some issues for the first time. "With three states going to the Congress, the meetings could see vibrant action. The majority in the Council is still with NDA; the Centre also has 33 per cent of the votes."

Harpreet Singh, partner at consultants KPMG, said the fact that all decisions in the Council have been made till now on a consensus was a very good practice, encouraging a federal tax structure of the country. "Hopefully, the same practice would continue," he said.

He added it would be good for taxpayers if the GST law was not tweaked to a substantial extent. "Lots of amendments might unsettle the mindset and derail the pace at which the teething issues have started receding," he explained.

Among the pending issues, the one on a sugar cess had seen division among states and a committee of the Council was formed under Assam finance minister Himanta Biswa Sarma to recommend on it. A proposal on  calamity cess to help flood-hit Kerala saw varied opinions and another panel was formed, under Bihar deputy chief minister Sushil Modi, to take views from states and give suggestions.  

News agency PTI says the next Council meeting might take up the issue of further rationalising the peak GST rate of 28 per cent in construction items such as cement. This slab has 35 items in it.