 "Mani's resignation creates another roadblock for GST")
The Centre will now have to appoint a new chairman for the empowered committee of state finance ministers on goods and services tax (GST) as the incumbent, Kerala finance minister K M Mani, quit on Tuesday in connection with a bribery case. The development comes at a time when the Centre is already struggling to gather support from the Opposition parties to roll out the uniform indirect tax legislation from April 1, 2016.
Mani announced his decision to resign from the Oommen Chandy Cabinet following intense pressure after strong remarks from the Kerala High Court regarding a bribery case according to which, Mani had accepted Rs 1 crore as bribe for renewal of licences of around 400 Indian-made foreign liquor bars in the state.
The next chairman of the committee will likely to be from a non-National Democratic Alliance (NDA) grouping. It’s an unwritten tradition that the chairman is from the opposition camp so that larger consensus on GST is evolved. The tradition has so far been maintained except when former finance minister P Chidambaram named Abdul Rahim Rather, a leader from the National Conference, an ally of the then ruling United Progressive Alliance (UPA).
The rollout of GST from the next financial year is already facing roadblocks with the NDA not having the required numbers in the Rajya Sabha to pass the Constitution amendment Bill. The Bill needs to be passed with a two-third majority in the Upper House. With the Congress, the Left and All India Anna Dravida Munnetra Kazhagam opposing the Bill in its present form, there is a shortage of seven members, assuming all other opposition members vote along with NDA in support of the Bill.
In case Janata Dal (United), or JD(U), and Rashtriya Janata Dal also oppose the Bill, whose alliance recently won the Bihar elections defeating the NDA, the going would be tougher for Centre. Earlier, JD(U) had supported the Bill in the Lok Sabha.
Even if the Bill is passed by Parliament, at least 15 states will have to give assent to it. With the defeat in Bihar, the NDA has only 11 states.
The Bills have been drafted by a joint committee and finance ministry officials and are to be discussed later this month by the committee members. The draft would, then, be put in the public domain before turning them into Bills.
After the Constitution amendment Bill is passed, the GST Council, to be headed by union finance ministry, has to be set up. The council will have the finance ministers of all states. It would take a call on various aspects including the GST rate.
The GST rate is yet to be fixed. A committee under chief economic adviser Arvind Subramanian is working on it. It would give its recommendation, a call on which would be taken by the yet-to-be-formed GST Council.
An earlier sub-panel of Empowered Committee had recommended a revenue neutral rate of 27 per cent. However, there was criticism that it was too high. Finance minister Arun Jaitley, too, said the rate should be substantially lower than this.
Various experts, who had given suggestions to a Rajya Sabha select panel on the Bill, said the GST rate should not be more than 20 per cent. The Congress wanted it to be within 18 per cent.
With barely five months left for the current financial year to be over, the GST rollout by next April means these hurdles to be overcome by then -- passage of Constitution amendment Bill in the Rajya Sabha; re-passage of the Bill by the Lok Sabha since the Upper House would make some amendments to the Bill passed by the Lok Sabha, ratification by at least 15 states, drafting of GST Bills, their passage in Parliament and state Assemblies; fixing of GST rate; its ratification by GST Council, etc.
Another challenge is that businesses would require time to understand the new indirect tax regime. Therefore, the rules will have to be put in the public domain, including a threshold, which is also being worked out.
Mani announced his decision to resign from the Oommen Chandy Cabinet following intense pressure after strong remarks from the Kerala High Court regarding a bribery case according to which, Mani had accepted Rs 1 crore as bribe for renewal of licences of around 400 Indian-made foreign liquor bars in the state.
The next chairman of the committee will likely to be from a non-National Democratic Alliance (NDA) grouping. It’s an unwritten tradition that the chairman is from the opposition camp so that larger consensus on GST is evolved. The tradition has so far been maintained except when former finance minister P Chidambaram named Abdul Rahim Rather, a leader from the National Conference, an ally of the then ruling United Progressive Alliance (UPA).
The rollout of GST from the next financial year is already facing roadblocks with the NDA not having the required numbers in the Rajya Sabha to pass the Constitution amendment Bill. The Bill needs to be passed with a two-third majority in the Upper House. With the Congress, the Left and All India Anna Dravida Munnetra Kazhagam opposing the Bill in its present form, there is a shortage of seven members, assuming all other opposition members vote along with NDA in support of the Bill.
In case Janata Dal (United), or JD(U), and Rashtriya Janata Dal also oppose the Bill, whose alliance recently won the Bihar elections defeating the NDA, the going would be tougher for Centre. Earlier, JD(U) had supported the Bill in the Lok Sabha.
Even if the Bill is passed by Parliament, at least 15 states will have to give assent to it. With the defeat in Bihar, the NDA has only 11 states.
The Bills have been drafted by a joint committee and finance ministry officials and are to be discussed later this month by the committee members. The draft would, then, be put in the public domain before turning them into Bills.
After the Constitution amendment Bill is passed, the GST Council, to be headed by union finance ministry, has to be set up. The council will have the finance ministers of all states. It would take a call on various aspects including the GST rate.
The GST rate is yet to be fixed. A committee under chief economic adviser Arvind Subramanian is working on it. It would give its recommendation, a call on which would be taken by the yet-to-be-formed GST Council.
An earlier sub-panel of Empowered Committee had recommended a revenue neutral rate of 27 per cent. However, there was criticism that it was too high. Finance minister Arun Jaitley, too, said the rate should be substantially lower than this.
Various experts, who had given suggestions to a Rajya Sabha select panel on the Bill, said the GST rate should not be more than 20 per cent. The Congress wanted it to be within 18 per cent.
With barely five months left for the current financial year to be over, the GST rollout by next April means these hurdles to be overcome by then -- passage of Constitution amendment Bill in the Rajya Sabha; re-passage of the Bill by the Lok Sabha since the Upper House would make some amendments to the Bill passed by the Lok Sabha, ratification by at least 15 states, drafting of GST Bills, their passage in Parliament and state Assemblies; fixing of GST rate; its ratification by GST Council, etc.
Another challenge is that businesses would require time to understand the new indirect tax regime. Therefore, the rules will have to be put in the public domain, including a threshold, which is also being worked out.
Tough Road Ahead for GST:
Constitution amendment Bill:
i) To be tabled in the Rajya Sabha
ii) Rajya Sabha have to pass it by a two-third majority
iii) Lok Sabha will also have to clear it by a two-third majority again
iv) At least 15 states will have to ratify it
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v) NDA has 11 states ruled by alliance or friendly parties
GST Bills:
i) A sub-panel of Empowered Committee and finance ministry officials drafted these Bills
ii) Empowered committee is to meet later this month to clear these
iii) Drafts will be then put on public domain to invite comments
iv) Central GST Bill, Integrated GST Bill have to be passed by the Centre
v) State GST Bill, I-GST have to be cleared by each state assembly
GST Rate:
i) Yet to be recommended by Arvind Subramanian panel
ii) GST Council to take a call on this. Council yet to be formed
iii) Congress wants it within 18 per cent, various experts had suggested upper limit of 20%
iv) Sub-panel had recommended 27 per cent