HSBC, Morgan Expect GST by Next Quarter
Mumbai: HSBC and Morgan Stanley are confident that the goods and services tax (GST) bill will be passed this year. The brokera g e s b e l i eve t hat t he r ul i ng Bharatiya Janata Party (BJP) may be able to muster enough strength in Rajya Sabha — the Upper House of Parliament — to pass the GST bill by next quarter.
Goods and services tax, considered the country’s biggest tax reform in two decades, is in a limbo as the Congress party, which enjoys a majority in Rajya Sabha, has opposed its passage in the current form. Reduction in the number of Rajya Sabha members opposing the bill is the key for bringing in the GST reform. That number currently stands at 91 and needs to fall to 82. HSBC and Morgan Stanley believe the Congress will lose ground as 75 Rajya Sabha members are retiring between March and July. Out of these 56 seats are coming up for re-election. Among the Rajya Sabha members opposed to the proposed GST reform, 67 are Congress legislators. “The Congress party could lose ground. While it holds 14 of the 56 seats that will be re-elected, 13 are in states it does not control. This raises the chances that some of these seats will slip out of its grasp, increasing the number of seats held by smaller parties with which the BJP can forge alliances,” HSBC economists Pranjul Bhandari, Prithviraj Srinivas and Stuti Saksena told clients in a report.
Morgan Stanley said the proportion of members supporting GST will increase to two-thirds. By July, the composition of Rajya Sabha will change in the favour of the government as changes to Rajya Sabha membership are fixed since they depend on the current composition of the state assemblies.
“We calculate BJP will gain two seats, the Congress will lose seven in the re-election. The BJP gain another seven seats via newly nominated members in Rajya Sabha (a prerogative vested with the government of the day). The net result of this and gains by BJP allies increases the number of those supporting the bill, from 97 to 110, and decreases those opposing to 81,” Morgan Stanley analysts Ridham Desai and Sheela Rathi said in recent report to clients. HSBC said that the Bankruptcy Code and the RBI Amendment Bill (which formalises inflation targeting) too is likely to be passed in 2016.