Arun Jaitley and his GST legacy
By Anil Padmanabhan
Mon, Oct 24 2016. 10 26 AM IST
While eventually credit will accrue to everyone, history books will record the transition to goods and services tax as Arun Jaitley’s legacy.
In everyone’s life, especially in public life, there is a defining moment. In the case of finance minister Arun Jaitley, it is the goods and services tax (GST)—India’s most important piece of tax reform, which will for the first time economically unify the country.
Undoubtedly there will be many claimants to this singular piece of tax reform; only natural, given its game changing nature. Yet, due credit must be accorded to Jaitley for shepherding it through the last mile.
To be sure, there are still difficult hoops to clear before GST becomes a reality—but the fact is that it has made dramatic progress after lying in cold storage for more than a decade.
It is a piece of tax reform which was initiated in the middle of the last decade. Yet, somehow, it was precisely this last mile which eluded closure
It found mention for the first time when the then finance minister, P. Chidambaram, proposed the idea in his 2006-07 budget speech.
Thereafter, every finance minister who followed, dutifully paid lip service to GST.
Even the nudge from the 13th Finance Commission—headed by former finance secretary Vijay Kelkar—which included it as a recommendation, failed to galvanize the politicians—especially the Bharatiya Janata Party (BJP), the leader of the opposition, which decided to play spoilsport.
Ironically, the BJP found itself in charge after it pulled off a stunning victory in the 16th general election in 2014.
Almost immediately, the BJP-led National Democratic Alliance (NDA) made GST a key part of its reforms agenda. But then, the Congress party felt it was payback time—given that the NDA was in a minority in the Rajya Sabha.
Over a year was wasted in the back and forth on the Constitutional amendment bill to roll out the GST; and everyone was beginning to give up on it.
Even sections of the NDA were sotto voce saying that it wouldn’t happen in this tenure; and since there is no guarantee of a re-election, the suggestion was that the country should make peace with the fact that it won’t get GST.
But one man didn’t give up.
Backed by the Prime Minister, Jaitley relentlessly worked the phone lines and his vast network on both sides of the aisles in the upper House.
Painstakingly he wore down his critics; the turning point was when Bihar chief minister Nitish Kumar openly backed the idea of GST—thereafter, more political parties started recalibrating their stand and, soon, the Congress was risking isolation.
The Congress made a last-ditch effort during the final debate in the Rajya Sabha.
Given the math in the favour of the opposition, it sought to badger Jaitley into making a commitment to not introduce the GST law as a money bill—something that the Rajya Sabha can oppose, but not block.
However, the finance minister stood his ground and, eventually, the bill was passed with a few amendments.
The action then shifted to the GST Council—the new body made up of the Union and state governments and chaired by Jaitley—to walk the tax reform through the last mile.
Last week, several insiders revealed that once again, it was Jaitley who was busy seeking out a consensus bridging many disparate views.
“I don’t think any other FM could have managed this. At no stage, despite the gravest provocation, have I seen him lose his temper or be brusque with anyone,” a state finance minister remarked.
Pushed to elaborate, the same finance minister, who did not want to be identified, summed up Jaitley’s ability in managing consensus in 3Ps: pragmatism, patience and politeness.
Given the structuring of the GST Council, these qualities are an imperative for managing consensus; especially for a regime, which, for the better part of its first two years, was engaged in constant confrontation with its political rivals, particularly the Congress.
While the Union government has one-third of the votes, the balance is held by the states; and for any matter to be approved, it requires at least two-thirds support—which is de facto consensus.
It is not surprising that Jaitley has morphed into the consensus man.
In many ways, Jaitley is the Bharatiya Janata Party’s front office in Delhi.
One of the most approachable cabinet ministers—who also has his share of bitter critics—he is the link between the BJP leadership spanning decades and involving L.K. Advani and Atal Bihari Vajpayee and now Narendra Modi and Amit Shah.
While eventually credit will accrue to everyone, history books will record the transition to goods and services tax as Jaitley’s legacy.