GST: Differing Perspectives

GST: Differing Perspectives

Question: The RS Select Committee has endorsed all the provisions of the GST bill to a great extent. Discuss the varying approaches towards GST and what this means for the passage of the bill.

- Opposition has forced adjournment on both Houses of the Parliament regarding GST

- But chances of the Constitution (122nd)Amendment Bill meant to introduce the GST passing has improved with the RS Select Committee endorsing most of its provisions

- Committee headed by BJP leader Bhupender Yadav has said GST rate should not exceed 20 percent as standard rate and 14 percent as reduced rate

- Demand of parties such as TMC for full compensation from centre for revenue loss by state during transition was also supported by the committee

- Provision in the Bill that the Centre can compensate the States for around 5 years for any revenue loss will be replaced with commitment of compensation for 5 years

- Committee’s report also contained dissent notes from parties such as the AIADMK, Congress and Left parties

- Bill has been approved by the LS and will be taken up by the RS

- This is a Constitution Amendment Bill so will have to be approved by two thirds of the RS members where ruling BJP does not have a majority

- Government will also depend upon regional allies for support

- Centre and states will be able to meet rollout target date of April 1, 2016

- The 21 member RS Select Panel has tabled the report on GST Bill with Amendments:

- It has accepted providing compensation to States for 5 years for revenue loss following the rollout of GST

- It has rejected the centre’s representation in the GST Council from one third to one fourth

- It has also recommended capping GST rate at 20% for standard rate and 14% for reduced rate

Three Dissent Notes

- Within the dissent note, Congress has made the demand that provision capping GST rate at 18 percent will be added to the Bill to insulate consumers including poor from unfair burden

- AIADMK’s note indicated that Centre’s stay in the GST council should be reduced and petroleum should be excluded from GST ambit

- AIADMK’s note also said the GST Council impinged on legislative sovereignty of parliament and state legislature would harm state autonomy in fiscal matters

- Left parties held that Bill promotes corporate interest of free flow of goods and services.

Facts and Stats

- Regarding the States’ demand for levy of 1% additional tax above and over GST on inter-state supply of goods, committee placed an amendment.

- As proposed levy will have a cascading impact on taxes, it should be on all forms of supply made for consideration

- GST is estimated to boost growth rate by 1.5 percentage points

- This is one of the biggest taxation reforms in India

- It is associated with the integration of state economies