GST Bill passed by RS as Congress give its ‘conditional’ support; can 'One Nation, One Tax' be rolled out by April 2017?

The Rajya Sabha on Wednesday overwhelmingly passed the Constitution Amendment Bill which will facilitate rollout of the Goods and Services Tax or GST in the country as main Opposition party Congress gave its support with some apprehensions.

The Constitution (122nd Amendment) Bill, 2014 was approved by the Upper House with 203 votes in favour and none against, after a seven-hour debate. 

The amid government assured the Congress and other opposition parties that that the tax rates would be kept "as low as possible" but refrained from making a promise on that the CGST and IGST Bills will be brought as finance bills and not as money bills. 

As a follow up to today's development, the CGST and IGST bills, which will be drafted by the Empowered Committee of state Finance Ministers, will be introduced in Parliament during the Winter Session. 

Before the passage of the Constitution Amendment Bill, Congress insisted on an assurance by the government that the CSGT and IGST would be treated as Finance bill and not money bill. 

Responding to this, Jaitley said, "We have absolutely no intention, in any way, to bypass the Constitutional provisions as far as requirements of the bill are concerned. We will fully comply with the Constitution and precedence." 

He added that it would be "unreasonable" to give an assurance since he was not aware of the content of those bills, neither had the GST Council discussed the issue and nor was there any such precedence. 

The Finance Minister, however, said the matter will be discussed with the opposition parties before moving ahead, an assurance which satisfied the Leader of Opposition Ghulam Nabi Azad. 

Congress leader and former Finance Minister P Chidambaram 
earlier said the government is not obliged to bring those bills as money bills and in the interest of the country "you should give an assurance to the House". 

On the additional one per cent manufacturing tax, he said experts were divided on the issue and many felt that it would have a cascading affect. 

The government plans to roll out the GST from April 2017, but the task seems mammoth and Finance Minister’s plans seem far-fetched as there is lot of work to be done before a uniform tax structure is implemented in the country. 

AIADMK was the only party to oppose the measure and its members staged a walkout from the House to register their unhappiness over the bill which lays the ground for rollout of uniform Goods and Services Tax (GST) regime that will subsume all indirect taxes including central excise duty and state VAT/sales tax. 

The easy passage was facilitated after the main opposition party Congress, which had been stalling the measure for over two years, came on board after the government made about six changes in the bill, including scrapping of 1 per cent manufacturing tax and incorporate clearer provisions for compensating states for revenue loss for five years. 

Replying to the debate during which most parties pressed for a Constitutional cap on GST tax rate at 18 per cent, Finance Minister Arun Jaitley said the guiding principle would be to keep the "rates as low as possible, certainly lower than what it is today."

"As we stand today, the political objective is very clear. The rate has to come down, the rate must be reasonable. We will try for this for the most reasonable rate," the Finance Minister said. 

He was responding to the major demand by most of the parties for capping the tax rate at 18 per cent. 

Jaitley said the Chief Economic Advisor, who was quoted by Chidambaram and others, had suggested a rate of between 16.9 and 18.9 per cent which was not acceptable to the state finance ministers. 

The proposal of imposing one per cent additional tax however, has been dropped.

Members of Shiv Sena, a constituent of the ruling NDA, said Mumbai municipal corporation, which garners around Rs 7,000-7,500 crore per year as octroi, will suffer revenue loss. 

Giving an assurance to them, the Finance Minister said state governments can compensate the municipal bodies as part of the devolution of tax proceeds. 

He said that GST would bring three changes - system will be more efficent, complaint and there will be less tax evasion; no cascading affect of tax on tax and; there will be several items on which there will be lower or no tax which would address inflationary concerns. 

At present the indirect taxes levied by centre and states go beyond 30 per cent and for the GST rates "we must trust the representatives of states an centre. Our guiding principle will be that we will lower the tax rates". 

Referring to the issue of compensation which has been amended, Jaitley said that the word "shall" has been used in place of "may" as states have developed apprehensions about the centre releasing funds to them. 

Usually "may" is used as mark of respect to Parliament, he said, adding it was unprecedented. 

The GST, he said, will not curtail the power of states but it will promote a concept of pooled sovereignty wherein the Centre and states will have uniform tax structure. 

He said under the GST Council, which will be responsible for setting the rates, the Centre and the states will be compelled to work with each other and both will have veto power. 

Every political party which is in power some state or the other will be represented in the GST Council, he said.

Under the modified provisions, GST Council will be required to establish a mechanism for adjudication of disputes, which could arise between the Centre and states or among states themselves. 

The 2014 bill authorised GST Council to decide upon the modalities for resolution of disputes. With these official amendments, the government has partially met the demands of the Congress party which has been blocking the bill in the Rajya Sabha. One of the three demands of the Congress was to do away with the 1 per cent additional manufacturing tax. 

On the demand for a Supreme Court judge-headed panel for resolving GST disputes, the official amendments say that the 
GST Council will establish a mechanism for solving disputes. 

With regard to the demand for putting a GST rate cap in the Constitution, Jaitley said that the decision would be taken by the GST Council which will have representation from the centre as well as states.

Here are major highlights of the debate on GST Amendment Bill in Rajya Sabha: 

* Congress demands CGST and IGST be brought as finance bills, Jaitley says 'can't promise'

* We will fully comply with the Constitution, no intention of bypassing the Constitutional provisions: Arun Jaitley on demands of bringing GST bills as financial bills

* He (Aurn Jaitley) left one thing unsaid. It is a unanimous demand of this House that the CGST and IGST Bill are brought before us as a financial bill and not as a money bill: P Chidambaram

* Finance Minister Arun Jaitley responds to GST debate in Rajya Sabha

* The 2011 bill had nothing on how to compensate for losses. That is why there were protests. Let us not make this a Congress vs BJP thing: Arun Jaitley

* I think to implement the GST is a headache, to be a former Finance Minister is a luxury now: Arun Jaitley

* We will try for the most reasonable rate for GST: Arun Jaitley 

* When GST system becomes more efficient, there will be no tax on tax, evasion will become more difficult : Arun Jaitley 

* The GST will bring in three developments- 1) The system will be more efficient and compliance will be met. Avoidance is going to be difficult because you will be detected at some stage or the other. 2) There will be no cascading effect on tax on tax 3) There are few goods on which the tax might be higher or lower. 54 per cent of the CPI basket is tax exempt. 32 per cent are taxed at a lower rate. Only 15 per cent are taxed at the standard rate: Arun Jaitley

* The states admittedly have to be stronger but the union also has to be there. India is not a confederation of states but a union of states: Arun Jaitley

* Sitaram Yechury says rights of states must be protected

* Are we going to reduce the states to come to Centre with begging bowls to ask for money?: CPIM's Sitaram Yechury

* JDU’s Sharad Yadav urge the government to pass the GST bill as a finance bill and not as a money bill 

* Derek O’Brien of the Trinamool Congress Party calls GST a Girgit Samjhauta Tax

* GST can also be interpreted as Girgit Samjhauta Tax (Chameleon Compromise Tax) – it’s like a ping-pong match between the two sides – (Treasury and Opposition tax): TMC's Derek O'Brien

* AIADMK opposes GST, says it violates fiscal autonomy of the states

* This constitutional amendment bill is not constitutional. It violates the fiscal autonomy of the states: AIADMK's A Navneethakrishnan

* The Bill violates the federal structure of the constitution and hence democracy: A Navneethakrishnan

* Samajwadi Party's Naresh Agrawal says bill must not be brought in as a money bill

* We agree with P Chidambaram that the bill must not be brought in as a money bill. It has to be discussed in both the houses before it is implemented: Naresh Agrawal

* BJP's Bhupendra Yadav says this GST bill has tried to simplify the tax that a common man has to pay

*  Standard rate of GST should not exceed 18 pc, says P Chidambaram

* I ask all of you do you agree or disagree with me - the rate should be changed only after the approval of Parliament. I, on behalf of my party, loudly and clearly demand that the standard rate of GST should not exceed 18%, says Chidambaram

* The 2014 bill was opposed, idea wasn't because we felt it was possible to have a more perfect bill. We tried to pass GST bill with support of principal opposition party but we failed. In last 18 months govt tried to pass GST without support of principal opposition & I'm glad you also failed: P Chidambaram

​* Finance Minister Arun Jaitley speaks in Rajya Sabha on GST

* Merits of the system itself are that it would convert India into one uniform economic market. GST Bill will empower the states. It will increase revenue of states as well as Centre. It'll ensure that there is "no tax on tax". With a uniform tax rate, bring about seamless transfer of goods and services across country, enable us to check evasion: Jaitley

* 2/3rd of the voting power in the GST council belongs to states, 1/3rd belongs to the Centre: FM Arun Jaitley in RS

* There has been major consensus building that has taken place, extremely thankful to all opposition parties especially Ghulam Nabi Azad: Jaitley
* GST Bill is the most reformative tax reform, says FM Arun Jaitley in Rajya Sabha