Introducing four bills to give effect to the Goods and Services Tax, Jaitley said preparations to roll out the new tax regime is nearing completion and the process to classify categories of commodities will start next month.
The aim of the GST Council is to decide everything relating to the tax structure with consensus and this is for the first time that such an arrangement has been made, based on the principle of shared sovereignty of both the Centre and the state governments, he said.
"It is incumbent on all of us to make sure that this federal institution works. The delicate balance between what the Centre and states have unanimously agreed is almost a federal contract. Its is federal contract with constitutional sanction," Jaitley said.
The basic principle to determine tax on items will be to find out the current tax components and bracket them under the nearest tax slab so that the prices do not increase, he said.
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The bills introduced are the Central Goods and Services Tax Bill, 2017, the Integrated Goods and Services Tax Bill, 2017, the Goods and Services Tax (Compensation to States) Bill, 2017 and the Union Territory Goods and Services Tax Bill, 2017.
Explaining the bills, he said the Central GST or CGST will give powers to the Centre to levy tax after excise, service tax and additional customs duty are all subsumed. The Integrated GST or IGST will be a tax to be levied by the Centre on inter-state movement of goods and services.
Besides, GST compensation law allows for imposition of cess on certain luxury goods like tobacco, high-end cars and aerated drinks to create a corpus for compensating states for any loss of revenue in the first five years of GST roll out.
The fourth law introduced is on Union Territory GST or UTGST for UTs like Chandigarh and Daman and Diu which do not have assemblies.
"We are creating by law a jurisdiction simultaneously both in the Centre and states and in the process handing over indirect tax administration to the first federal institution that India has created where Centre and the States will both participate," he said.
It has already approved four-tier tax slabs of 5, 12, 18 and 28 per cent plus an additional cess on demerit goods like luxury cars, aerated drinks and tobacco products. The work on putting various goods and services in the different slabs is slated to begin next month.
Jaitley said the tax beyond 28 per cent on luxury items will be considered as compensation tax for the next 5 years and the money will go to the fund from where states losing on tax will be compensated.
Referring to tax bracket of luxury goods, he said the extra component beyond 28 per cent tax has been kept as cess as keeping it as tax would have negative impact on the consumers.
Jaitley said as keeping it as tax would have resulted some portion of the money going to devolution. "To make a compensation package of Rs 50,000, we would have to levy tax of Rs 1.72 lakh crore."
He said that "some rules have been made and remaining rules will be ready by 31st. The council made a broad arrangement on division of work between the Centre and State. Besides that the process to classify which commodities will fall in which category will start next month".
Referring to functioning of the GST council, he said all the parties need to adopt positive approach as the system may badly hit if the contracting parties take "unilateral decisions".
"There can be a situation where all the 32 legislatures (members of the GST council) may say I will make one or two changes to the law that we all have agreed...Unilateralism is possible if the area is exclusively in your domain," he said.
consensus and slowly all items will come within the ambit of the new indirect tax regime, which will ensure free flow of goods and services throughout the country.
"The hard work put in by GST Council members and officers bore fruits today in terms of 4 classic pieces of legislation passed by the Lok Sabha," Revenue Secretary Hasmukh Adhia tweeted later.
Adhia termed the passage of the four laws as a "historic milestone in economic history of this country".
Replying to the discussion on the four bills, Jaitley said once the new tax regime is rolled out, a businessman will have to deal with only one assessing officer instead of multiple authorities at present.
To opposition questions as to why the government brought the legislations as 'Money Bills', Jaitley cited the Constitutional provisions and said that since 1950 all tax- related legislations were brought before Parliament as Money Bill.
With regard to centralised registration to banks, the Minister said the GST Council will take a final decision in this regard.
Elaborating on the anti-profiteering provisions, he said these are meant to ensure that the benefits of reduction in tax rates are passed on to the consumers and there should be no "unjust enrichment".
He further said most of the agricultural produce would continue to be zero rated and there should be "no confusion" about it.
As regards Jammu and Kashmir, the Finance Minister said the law passed by Parliament will not apply to the state which will have to legislate its own law and integrate with the GST regime.
On the powers of CAG to audit GST, the Minister said that the official auditor draws its power from the Constitution and the CAG Act and there was no need to mention it separately in the legislations.
Jaitley also dismissed the contention that GST would erode the power of Parliament and state legislatures to levy taxes. He said the taxation powers would continue to be with the legislatures and would be used on the recommendations of the GST Council.
Under the new regime, sovereignity would be shared between the Centre and the states.
"The GST idea has created a grey area (with regard to power of Centre and states)... Taxes will be jointly imposed by Centre and states, there will be one tax," he said, adding an expert committee has been appointed to remove bottlenecks relating to GST implementation.