The constitutional amendment that allows for a Goods and Services Tax, is more likely to be passed in this Monsoon Session of Parliament, says Japanese financial services major Nomura.
According to Nomura, the expected timeline for the passage of GST is by August 12 and there is a 60 per cent probability for this.
"We believe a constitutional amendment that allows for a goods and services tax is more likely than not to be passed during the ongoing Monsoon Session of parliament (July 18-August 12)," Nomura said in a research note.
The GST bill, which intends to convert 29 states into a single market through a new indirect tax regime, was earlier planned to be introduced from April 1, but the deadline was missed as the legislation to roll it out remains in limbo in the Opposition-dominated Rajya Sabha.
"We believe a compromise can be reached on the 18 per cent GST cap demand if the Congress either agrees to include the tax rate cap in the central government's GST bill (instead of the constitution) or if the Congress agrees to a much higher tax rate cap," Nomura said, adding in the scenario where a consensus is not reached, we would expect the BJP to bring the constitutional amendment GST bill to vote in the upper house.
"According to the report, GST would have a mixed impact in the short term, because it may temporarily reduce growth, push up inflation and hurt state tax collections."
However, "we believe medium-term impact is unambiguously positive," the report said.
"Once the constitutional amendment is passed in the Upper House, it will need to be ratified by more than 50 per cent of the 29 state assemblies," it added.
This would then be followed by passage of the central government GST laws in both lower and upper houses, as well as passage of state GST laws in their respective state assemblies.
For the GST to be implemented by April 2017, the constitutional amendment bill would need to be passed in the ongoing monsoon session of parliament, otherwise there are risks it could get delayed even further.