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Economy Jun 17, 2013

Modi in, Modi out: Splitting headache for UPA on GST

By Firstbiz Editors

Narendra Modi's escalation in the BJP and in turn NDA has a collateral damage in the economy--the goods and services tax.

According to various media reports, Janata Dal's (United) split with the NDA will result in the resignation of Bihar's Deputy Chief Minister and Finance Minister Sushil Kumar Modi, who also heads the Empowered Group of Ministers on GST.

Sushil Kumar Modi will have to resign the chairmanship of the GST panel as the BJP will no longer be supporting the Nitish Kumar government in the state, said a report in the Economic Times.

The split in the NDA can't come at a more inopportune time for the United Progressive Alliance. The Congress-led alliance was relieved as the panel had recently made headways in breaking the GST imbroglio.

Giving the chairmanship of GST panel to the BJP leader was strategic for the Congress as it was banking on Modi to cut ice with the Opposition-ruled states.

Giving the chairmanship of GST panel to the BJP leader was strategic for the Congress as it was banking on Modi to cut ice with the Opposition-ruled states.

Giving the chairmanship of GST panel to the BJP leader was strategic for the Congress as it was banking on Modi to cut ice with the Opposition-ruled states. AFP

Though there were indications that these were originally paying off for the UPA, Prime Minister Manmohan Singh had last month said that only the next government will be able to roll out the tax reform.

"We will have elections in April 2014... I think there will be a strong effort by whichever government is in power that time to move towards the GST," Singh was quoted as saying in a BS report.

Reacting to the prime minister's comments, Sushil Kumar Modi had later told CNBC TV18 that he was not disappointed with the statement.

"It is not possible for any government to introduce such large-scale reforms in last year of its tenure," he had said.

Experts have time and again stressed the importance of rolling out the tax reform as this will help the growth of the economy. The tax reform seeks to streamline all the taxes across states and create a single tax system for all goods and services rendered in the country.

The panel was set up in 2000. It was headed by Asim Dasgupta then finance minister of West Bengal. He resigned and then was Sushil Kumar Modi's turn. There has only been minimal breakthroughs over the last 13 years.

Indications were that the UPA-II is again on the backfoot on implementing the reform.

Now, with Sushil Kumar Modi on his way out, it is the UPA's headache to find a new head for the panel and probably the GST is again entering a long hiatus.

by Firstbiz Editors

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