Indian government has circulated official amendments to the Goods and Services Tax (GST) bill to drop 1 per cent additional tax and include a definite provision in the statute for compensating states for revenue loss for five years as it gears up to discuss the long-pending bill in the upper house of parliament (Rajya Sabha) tomorrow.
Under the modified provisions of GST Constitutional Amendment Bill circulated among the members today, 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 in opposition which has been blocking the bill in the upper house. 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, the government has not mentioned anything in the official amendments.
Finance minister Arun Jaitley, at a meeting with his state counterparts last week, promised to keep the incidence of tax low while safeguarding the revenue of the states.
Jaitley has been meeting leaders of Congress and other parties, including Samajwadi Party (SP), Biju Janta Dal (BJD), Trinamool Congress (TMC) and Rashtriya Janta Dal (RJD), to build a consensus on the passage of the long-pending indirect tax reform bill in the Rajya Sabha. It was approved by the lower house of parliament, Lok Sabha, in May 2015.
A look at the amendments
The Constitution (122nd Amendment) Bill, 2014, which lays the ground for roll out of Goods and Services Tax regime that will subsume all indirect taxes including central excise duty and state sales tax and Value-added Tax (VAT), is listed for consideration and passage in the upper house tomorrow.
The amendments also seek to clarify that state's share of Integrated GST (iGST) will not form part of the Consolidated Fund of India and the term iGST itself would be replaced by 'goods and services tax levied on supplies in the course of inter-state trade or commerce' in Clause 12 dealing with apportionment of the proceeds.
It was also clarified that Central GST (CGST) and the centre's share of iGST will be distributed between the centre and the states.
Earlier, some members, including Naresh Agarwal of SP, raised concerns in the Rajya Sabha that they had not received copies of the GST Bill or the amendment.
Jaitley told Rajya Sabha the amendments to the bill, pending in the upper house for last one year, were given to the Secretariat of the House two days ago and have been circulated to the members.
The bill, which was approved by the Lok Sabha in May, provided for 1 per cent additional tax on inter-state trade and commerce for two years or more as may be decided by the GST Council. Even the Rajya Sabha Select Committee had suggested removal of this provision as it would lead to cascading of taxes.
A constitution amendment requires support of two-third members present and voting. The amendment will then have to be approved by 50 per cent of all the state assemblies.
Congress originally mooted GST in 2006 and a constitution amendment bill was introduced in Lok Sabha in March 2011 but it lapsed with the dissolution of the 15th Lok Sabha.