India on Monday took a major step towards a unified goods and services tax regime across the country, with parliament passing the relevant constitution amendment bill in what is seen as the most radical indirect tax reform in over six decades. The Lok Sabha on Monday passed the amendments to the bill adopted by Rajya Sabha during its passage last week.
Prime Minister Narendra Modi was present in the Lok Sabha when the bill was passed. Intervening during the nearly six-hour debate on the bill, he said Goods and Services Tax (GST) bill would go a long way in helping states, support small entrepreneurs and also curb the menace of corruption. He said that the new tax law would be an important step towards getting the country rid of "tax terrorism" and also make "consumers the king".
The Constitution (One Hundred and Twenty-Second Amendment) Bill, 2014 and amendments were first declared approved by a two-thirds majority with 443 members of the lower house voting in its favour in the final vote and none against. AIADMK, which had staged a walk out in the Rajya Sabha, did so in the Lok Sabha also. The government had moved amendments in the Rajya Sabha to the bill, which was passed by the Lok Sabha in 2015, to accommodate concerns of opposition, notably the Congress.
The new regime -- the idea for which was mooted some 13 years ago -- seeks to subsume all central indirect levies like excise duty, countervailing duty and service tax, as also state taxes such as value-added tax, entry tax, and luxury tax, to create a single, pan-India market.
Some items, notably potable alcohol and petroleum products, will be outside its purview for now. Replying to the debate, Finance Minister Arun Jaitley said that demand for reducing the indirect taxes and hiking direct taxes is not practical, adding corporate tax in India was kept "competitive" on purpose, in comparison with other countries. Jaitley hit out at the Congress, saying the 18 per cent cap on GST rate was suggested by the party when the bill was passed in the Lok Sabha and later tabled in the Rajya Sabha.
The leader of the Congress in the Lok Sabha Mallikarjun Kharge took a dig at Prime Minister Modi, saying he had opposed the bill as Gujarat Chief Minister by calling it "retrograde in nature". "We were the creators of the GST. We were the first to bring the GST. We support it. Those who are passing the GST now, why were they opposing it when they were in the opposition?
"Had they agreed to our conditions on the GST earlier, the delay wouldn't have happened. We were never against the GST. We always wanted to pass it. It is wrong to say that we blocked the GST Bill," he said.
Following the passage by parliament, at least 50 percent of the states will have to ratify it for it to become law. This apart, while the centre will have have to take Parliament's nod again for its version of the GST, states too will need to do the same, which may not be a quick process. To reach a compromise, the government had to concede to two main demands of the Congress -- scrapping the proposal to levy a 1 per cent additional duty so that states get compensated for at least two years and make the dispute resolution mechanism stronger and empowered. But the third demand -- of specifying the GST rate in the bill itself was not acceded.
Even though the idea of a pan-India GST was first mooted in 2003, it was seven years later that a formal bill was first introduced. But this lapsed when the United Progressive Alliance (UPA) was voted out, and the Modi government took over. In 2014, a recast bill was introduced in the Lok Sabha on December 19 and was passed by it five months later on May 6, 2015. The bill was then referred to a Select Committee of theRajya Sabha for examination which submitted its Report on July 22, 2015.