Modi Offers Olive Branch to Gandhi to End India Tax Impasse

  • No breakthrough during meeting at prime minister's residence
  • Gandhi's Congress party has repeatedly blocked the measure

Prime Minister Narendra Modi met 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.

Modi met 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, Finance Minister Arun Jaitley told reporters after the meeting. The talks were inconclusive and the government will consider arranging further discussions with Congress to resolve the impasse, he said.

“The government presented its position on the GST and its importance, and the Congress leaders outlined the grounds for their opposition to the amendment,” Jaitley told reporters outside Modi’s residence. “The Congress leaders will take some time to discuss the issue within their party before coming back to us.”

India’s stocks climbed on Friday amid optimism that the GST would be passed in the parliamentary session that runs through Dec. 23. While Modi this month took steps to boost foreign investment and infrastructure spending, the GST has become a bellwether for progress.

Modi’s 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 Modi made the offer to meet “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.”

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 percent and scrapping an additional one percent tax designed to compensate manufacturing-heavy states that fear losing revenue once the measure is implemented.

Jaitley said this month that he has enough support to pass the GST if only the Congress party would allow a vote. He’s also signaled some room for compromise, without getting into specifics.

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