With a hope that landmark Goods and Services Tax (GST) regime would increase India’s GDP by 1-2 per cent, the Government plans to take up the Constitution Amendment Bill on GST for consideration and passage within a few days during the ongoing Session of Parliament to ensure rollout of the new indirect tax regime from April 1, 2016.
“In view of the near unanimous support of States, that it is going to be a win-win situation for all, we will go ahead with the Constitution Amendment in the current session of Parliament,” Finance Minister Arun Jaitley told reporters after a meeting with the members of the empowered committee of State FMs.
“I will be giving notice (so that it can be) taken up for discussion in the lok Sabha in the next couple of days,” he added. Although most of the States are on board, Tamil Nadu voiced reservation over a bill being introduced in Parliament before a consensus on actual rates and tax bands is evolved through the empowered committee.
The GST Bill was introduced in the lok Sabha in December. A single rate of GST will replace central excise, state VAT, entertainment tax, octroi, entry tax, luxury tax and purchase tax on goods and services to ensure seamless transfer of goods and services. The GST legislation, being a Constitution Amendment, will require support of the two third members of Parliament and thereafter ratification by half of the States.
“Today the positive is (that) States are quite determined and they see the obvious benefits of the GST. The concerns cut across party lines and it is a genuine relationship between the Centre and the States. Broadly, the approach of the states and centre is converging in the same direction,” he said. Minister of State for Finance Jayant Sinha said, “We see no obstacles that will interfere with the April 1, 2016 timeline for GST.”
“We are trying our best to work up to an endeavour where, with the support of the IT backbone which has been created we try and maintain the target date of April 1, 2016. We are quite optimistic about that target,” Sinha said. Participating in the deliberations, Tamil Nadu Minister for Commercial Taxes and Registration MC Sampath said, “Current proposal of the Centre to introduce a Constitutional Amendment Bill on GST and then to evolve a consensus on various aspects of GST, especially the actual tax rates and tax bands, through the GST Council is not acceptable to us.
“Broad consensus on the critical issues should be evolved on these critical issues through the Empowered Committee before the enactment of the Bill is taken up.” Jaitley said the empowered committee in its meeting on Wednesday did not discuss the revenue neutral rate (RNR). RNR which is currently pegged at 27 per cent is one at which there will be no revenue loss to States after GST implementation.
The re-calculation of RNR is necessary as at present it does not take into account the taxation of petroleum products as also the 1 per cent additional tax which states can levy as part of the GST Bill. As part of the Bill, liquor has been completely kept out of the GST, petroleum products like petrol and diesel will be part of the new regime from a date to be decided at a future date by the GST Council, which will have two-third of its members from States. All decisions in the Council will require 75 per cent votes. Also all States can levy 1 per cent additional tax over GST to make up for any revenue loss for the first two years. The meeting was attended by the Finance Ministers of 18 States and other States were represented by officials.