Indian PM seeks end to tax impasse

NEW DELHI: Prime Minister Narendra Modi has invited top leaders of the main opposition Congress Party to discuss a compromise on passing a national sales tax, his biggest move yet to push through one of India’s most important economic reforms since the 1990s.

Mr Modi wants to meet Congress Party president Sonia Gandhi and former prime minister Manmohan Singh to end a months-long deadlock over the goods and services tax, known as GST, Parliamentary Affairs Minister Venkaiah Naidu told reporters yesterday.

He plans to meet them for tea at his New Delhi residence, local media reported.

India’s stocks climbed amid optimism that the GST would be passed in the parliamentary session that runs through Dec 23.

While Mr Modi this month took steps to boost foreign investment and infrastructure spending, the GST has become a bellwether for progress.

His opponents have repeatedly blocked a bill to amend India’s constitution to pave the way for the GST, contributing to declines in the nation’s stocks and currency as investors become impatient with the pace of reforms.

Rahul Gandhi, Sonia’s son and the Congress party’s vice-president, said Mr Modi made the offer “under public pressure”.

“We are clear that we want a cap on the GST,” Rahul Gandhi told reporters in parliament. “There’s a need to set a ceiling to protect the poor.”

Mr Modi needs the Gandhi family’s support to get the legislation approved in parliament’s upper house, where his party is in the minority. The GST aims to whittle down more than a dozen state levies to create a single market among the country’s 1.3 billion people for the first time.

Congress, which initially proposed the tax in 2006 when it held power, is demanding several changes. They include capping the overall rate at 18% and scrapping an additional 1% tax designed to compensate manufacturing-heavy states that fear losing revenue once the measure is implemented.

Finance Minister Arun Jaitley said this month that he has enough support to pass the GST if only the Congress party would allow a vote.

Mr Jaitley has also signalled some room for compromise without getting into specifics of the details.