The Economic Times daily newspaper is available online now.

    Parliament passes amendment Bill for GST; shifts reform to states who need to pass it

    Synopsis

    The government wants to implement this tax, which will replace as many as 17 indirect taxes levied by states and the Centre, from April 1, 2017.

    ET Bureau
    NEW DELHI: Parliament has passed the constitution amendment Bill to roll out Goods & Services Tax, shifting this historical reform to states that need to pass it quickly for the Centre to take the next steps.
    The Lok Sabha on Monday passed the changes to the Constitution (22nd Amendment) Bill, 2014, cleared by Rajya Sabha on Wednesday last week. In all 443 members voted in favour of the Bill and none against. The Lok Sabha had passed the Bill last year in May, but that underwent some amendments in the upper house.

    The government wants to implement this tax, which will replace as many as 17 indirect taxes levied by states and the Centre, from April 1, 2017. It needs to get two more laws to be passed by Parliament in the winter session.

    At least 16 out of 31 provinces with Assemblies (29 states and two of the seven union territories), or more than half the total, need to pass this Bill before it can be sent for President’s assent.

    The government is in touch with several state governments to get the Bill passed that will create a national market for delivery of goods and services currently fragmented along state boundaries.

    Image article boday


    The new tax system is expected to make manufacturing more competitive and speed up logistics among host of other benefits. Some estimates say it will add up to 2% to the country’s GDP.

    “This is indeed the biggest reform in the field of taxes in the country,” industry body CII said, calling for its implementation by April 1next year.

    GST RATES
    Finance Minister Arun Jaitley said the GST rate will be decided by the GST Council, a body of states and the Centre that will be set up after the constitutional amendment is approved by the required number of states and signed by the President. “This (rate) is a subject of calculation and not political sloganeering,” Jaitley said in his reply to the debate on GST, rebuffing demand for a cap of 18% on the rates.

    A committee headed by Chief Economic Adviser Arvind Subramanian has suggested a standard GST rate of 18%, while assuming the low end of the rate at 12% and the upper end at 40% on sin goods that are seen as harmful to the society.

    “Why would elected finance ministers of 29 states or representatives of Centre want to put unnecessary burden on consumers,” the finance minister said, questioning the charge that the rate will be set too high and will hit consumers.

    Everyone will want that lowest rate which will allow their government to function properly, he said, reiterating the guiding principles laid down by an empowered committee of state finance ministers that rates should fall under GST.

    Several states have said the 18% rate is too low. Jaitley said the calculamoney tion is based on 2013-14 and ignores the cesses levied after that and it also needs to factor in the compensation the Centre has to pay to states.

    “All (state) finance ministers said we have a slightly different perception (from CEA). Now that gap of 2-3-4% between them has to be converged,” Jaitley said, adding that the Bill moved by the previous UPA government also did not have the concept of a rate cap.

    MONEY BILL OR FINANCE BILL
    Jaitley rejected the demand that the GST Bill, which will have the details of the tax, not be brought as a money Bill but as a finance Bill. The Rajya Sabha, where the ruling NDA is in minority, doesn’t have much say on a calculamoney Bill. There was a similar demand in the Rajya Sabha as well.

    “Whatever final draft the GST council prepares, depending on the language of that draft, it will be the authority of the speaker to decide (if it is money Bill or finance Bill),” the minister said, adding that he has no discretion on the matter.

    GST COUNCIL COMPOSITION
    The finance minister said the concept that the GST Council will have two-third vote for the States and onethird for the Centre had been accepted by the UPA government after a standing committee proposed this formula.

    In November 2013, the UPA accepted a proposal that any decision needed to be made a 75% vote.

    Jaitley criticised the idea that a judicial tribunal should resolve disputes. “In the case of dispute between two states or between the Centre and states … how are taxation disputes to be resolved. These are political decisions,” the minister said. “The entire standing committee felt these are political disputes … should be resolved through some political mechanism,” he said.

    “The other feeling behind this was that the imbalance that has come in our arrangement of power of separation that there is excessive judicial intervention in executive function. Will you give taxation power also to judiciary,” he asked.

    “(The GST) Council should decide what kind of dispute settle mechanism should be there; don’t handover this power also to courts — this was the feeling (in standing committee),” he said.

    PROFITEERING CLAUSE
    On the issue of a Malaysia-type antiprofiteering law to ensure that the benefits of the new tax system are shared with the consumer, Jaitley said this issue will arise when the council decides on the rate. The Centre or states do not have to make this decision right away, he said.

    There is no need to write such a thing in the Constitution, the finance minister said, clarifying that the constitution amendment is only an enabling provision.

    “In what situation an anti-profiteering clause will trigger will depend on recommendation of the GST council,” he added.


    (You can now subscribe to our Economic Times WhatsApp channel)
    (Catch all the Business News, Breaking News, Budget 2024 News, Budget 2024 Live Coverage, Events and Latest News Updates on The Economic Times.)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the ET ePaper online.

    ...more

    (You can now subscribe to our Economic Times WhatsApp channel)
    (Catch all the Business News, Breaking News, Budget 2024 News, Budget 2024 Live Coverage, Events and Latest News Updates on The Economic Times.)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the ET ePaper online.

    ...more
    The Economic Times

    Stories you might be interested in