NEW DELHI: Amid stiff opposition, the government on Friday introduced the Constitution Amendment Bill on Goods and Services Tax (GST) for discussion in Parliament.
While presenting the Bill in the Lok Sabha, Finance Minister Arun Jaitley said, “The GST Constitution Amendment will harmonise the indirect tax regime as far as the whole country is concerned. It is expected to reduce the cost of production and inflation in the economy thereby making Indian trade and industry more competitive, domestically as well as internationally.”
Earlier this week, Jaitley had a 3-hour long discussion with state finance ministers where both states and Centre had reached a “broad consensus” over the Bill, though few states pressed for changes in some of the provisions.
However, since GST is the destination based tax, most of the manufacturing states like Gujarat, Tamil Nadu and Maharashtra had some reservations.
In a destination based tax regime, consuming states are the real beneficiaries. If the goods are produced in one state and sold in another, the tax advantage of that will go to the consuming state.
In the Lok Sabha, many opposition MPs expressed their concerns over the Bill. MThambidurai of AIADMK while contesting the issue said,“There are differences of opinion and hence it is better to refer it to the standing committee.”
Thambidurai claims that Tamil Nadu is already losing `10,000 crore per year due to introduction of GST, “How are you going to compensate that?” he asked the finance minister.
In his reply, Jaitley said, “Tamil Nadu is also giving a lot of service tax. The state today does not get any benefit out of that service tax. Benefit of the service tax after GST will also be available to Tamil Nadu.”
The Bill also inserts a new Article in the Constitution to give the Central and state governments the concurrent power to make laws on the taxation of goods and services. The Bill seeks to establish a GST Council tasked with optimising tax collection for goods and services by the States and Centre.
The GST Council will be the body that decides which taxes levied by the Centre, States and local bodies will go into the GST; which goods and services will be subjected to GST; and the basis and the rates at which GST will be applied.
The Centre and the states are working on a new revenue neutral rate (RNR), which is currently pegged at 27 per cent. “The RNR is being recalculated and once the RNR is recalculated, then what will be the GST rate will be a matter to be decided by the GST Council under the Constitutional Amendment,” revenue secretary Shaktikanta Das said earlier.
The RNR is the one at which there will be no revenue loss to the states after GST implementation. The government is vigorously pursuing the implementation of GST, one of the key reforms promised by the BJP in its election manifesto.
With a hope to get the Bill passed after the debate, Jaitley said, “GST is going to lead to a win-win situation as far as the Centre and the states are concerned. It is going to up India’s GDP, it is going to up India’s revenues.”
The government targets to implement it from April 2016.