India's goods and services tax bill to face lower house scrutiny

New Delhi, Delhi, India Updated: Aug 08, 2016, 03:24 AM(IST)

The Lower House was adjourned for the day. The Upper House has been adjourned till 2pm. Photograph:( Reuters )

Ahead of the Lok Sabha, the Indian Parliament's lower house, taking up the Constitution Amendment Bill, an enabling legislation to facilitate the key tax reform Goods and Services Tax (GST), two major parties on Sunday issued whips to their MPs, making it mandatory for them to remain present during the voting.

Congress chief whip Jyotiraditya Scindia has asked his party MPs to attend the House and extend support to the bill. "We are supporting Constitutional Amendment Bill. That is on the merit of it. GST is something important for the country. The party will support the Bill with the amendments which the ruling party has assured us," he said.

The Bill had been passed by the Lok Sabha in 2014 but it was hanging in the Rajya Sabha, upper house of the Indian Parliament, all this time due to differences until the government came forward last week to consent to some of the changes suggested by the Congress. Amendments made by the Rajya Sabha in seven clauses will have to be passed by the Lok Sabha before the Bill goes to the state legislatures for approval to help the government move further to bring specific GST Bills for implementing the new tax encompassing all existing central and state indirect taxes from April 1, 2017.

One of the changes brought by the government in the Rajya Sabha on its own and not on the Opposition's demand relates to not putting the entire tax collected in the consolidated fund of India so as to enable the Centre transfer part of it to the state concerned and vice versa. All other changes are based on the Congress demands.

Prime Minister Narendra Modi is likely to intervene once the debate starts in Lok Sabha on Monday. Aiming for early roll out of the GST, touted as the most major reform since 1991, Union ministers have spoken to chief ministers of NDA-ruled states to ensure that the constitutional amendment is ratified by state assemblies at the earliest. The chief ministers have assured that, if required, they will call a special session for the passage of the Bill in their state assemblies. The GST Bill has to be ratified by at least 16 states in 30 days after it is passed by Lok Sabha.

Once implemented, GST will subsume various taxes, including excise, services tax, octroi and other levies, and the proceeds will be shared between the Centre and the states. Under the new GST regime goods would be taxed at the point of consumption, instead of the goods being taxed multiple times at different rates.

Evaluating various provisions of Model GST Bill, the Confederation of All India Traders (CAIT) here on Sunday supported the Congress contention that the 18 per cent standard tax rate will prove to be an ideal rate. Explaining the reasoning, CAIT National President BC Bhartia and secretary general Praveen Khandelwal said that under current VAT regime items placed under five per cent tax slab will be attracting standard rate of tax which may be 18 per cent, and it is feared that such a situation will lead to inflation. But these goods are largely used as raw material.

On the other hand, currently the items under VAT slab of 12.5 per cent with various cess will also be placed under the standard tax rate of 18 per cent. They apprehend, that in spite of all the mathematics, there might be some inflation in the initial days, which may subside once the taxation system is fully adopted in its letter and spirit.

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