Constitutional amendment Bill for GST introduced

Opposition, led by Cong, largely walks out in Lok Sabha after demand for referral to standing panel rejected by govt; enough examination already, nothing for states to fear, avers Jaitley

The government finally moved the long-pending Constitution amendment Bill for the proposed national goods and services tax (GST) for consideration. It met stiff resistance from opposition parties, several of which walked out, demanding it be sent to a standing committee.

"GST is going to lead to a win-win situation as far as the Centre and the states are concerned. It is going to up India's GDP (gross domestic product). It is going to up India's revenue and therefore I commend (the) Bill to the house for consideration," Finance Minister Arun Jaitley said in the Lok Sabha.

Later, he told reporters it would not be sent to a committee.

Among those walking out after their plea in this regard was not accepted were the Congress (led by chief Sonia Gandhi), Trinamool Congress, Left parties, and the Nationalist Congress Party. The AIADMK and Biju Janata Dal also opposed introduction of the Bill but did not walk out. They said more time was needed to study it.

The opposition benches also said discussion on the Bill would eat into the time allocated for discussing the Finance Bill (which incorporates the Budget proposals). To which, Jaitley assured full cooperation from the government to complete the business of demands for grants of various ministries by Tuesday.

"Please do not have this fear of revenue loss on account of GST implementation," he said in commending the Bill to the house. He said GST would lead to ease of doing business, beside helping trade to grow. And, noted the process of bringing the Bill had started during the previous National Democratic Alliance rule in 2003 and the Congress-led government had pushed it. Plus, a standing committee of Parliament had also examined it over two and a half years."I think, we did not have a more extensive debate on any Bill since 1950."

On the work done in the empowered committee of state finance ministers on GST, Jaitley said the "wisdom of Parliament and wisdom of state finance ministers needs to converge so that a consensus is arrived at". He noted it had gone through two central governments and four state finance ministers in the capacity of heads of the committee.

Insisting states had nothing to fear, Jaitley said the structure of the proposed GST Council was such as to give them a veto. "States have a two-third majority (in the Council) and, therefore, if even half of them come together, they have a veto. This federalism leans in favour of states. All decisions in the Council will require 75 per cent votes. That is how we have integrated the whole system of cooperative federalism in the taxation system."

There would, he said, be 100 percent compensation in the first three years, 75 per cent in the fourth year and 50 per cent in the fifth year for the states. In the sixth year, none would require compensation as they would have got the needed revenues by then, as was the case with introduction of value added tax (VAT).

The Bill says states where goods originate can levy one per cent additional tax over GST to make up for any revenue loss for the first two years. States have been asking for an increase in this time frame, as well as in the amount of the additional levy. Some seek a vote on the matter in the empowered committee. It meets next on May 7-8 in Thiruvananthapuram.

The Bill on GST, described as the biggest tax reform after 1947, was introduced in the Lok Sabha in December last year. 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 ensures eamless transfer of goods and services. Liquor has been completely kept out of GST and 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.