The UPA may be banking on political gains from the BJP-JD(U) split in Bihar but the development will affect its reforms agenda.
The reworked equations in the state will be the latest stumbling block for the rollout of the goods and services tax from next year with Bihar deputy chief minister Sushil Kumar Modi set to resign as the head of the empowered group of state finance ministers working on launching the country’s biggest tax reform initiative.
GST will usher in a common tax regime for goods and services, which is expected to help businesses get more efficient and increase tax collections for the government.
In fact during his 23-month stint, two critical decisions – a negative list for tax on services and a floor rate – were taken. The Bihar deputy CM was appointed the head of the group in July 2011after the Left was ousted in West Bengal and Asim Dasgupta had to step down.
Although major steps, such as the Constitutional amendment is still pending in Parliament, there are several nuts and bold moves such as the threshold exemption limit beyond which the common tax will be levied are yet to be decided.
Apart from the two BJP-ruled states, even Haryana, where the Congress is in power, and Punjab have concerns that fear significant revenue loss once the new tax regime kicks in.