The historic Goods and Services Tax (GST) regime today came a step closer to meet its July 1 target of rollout, with the Lok Sabha approving four supplementary legislations.
The Central GST Bill, 2017; The Integrated GST Bill, 2017; The GST (Compensation to States) Bill, 2017; and The Union Territory GST Bill, 2017 were passed after negation of a host of amendments moved by the Opposition parties.
Touted as the biggest taxation reform since Independence, GST will subsume central excise, service tax, VAT and other local levies to create an uniform market. GST is expected to boost GDP growth by about 2 percent and check tax evasion.
Commodities to become cheaper
Replying to the seven-hour-long debate, Finance Minister Arun Jaitley said the GST which will usher in a uniform indirect tax regime in the country and will make commodities "slightly cheaper".
He said the GST rates would depend upon whether the commodity is used by a rich person or a common man.
Jaitley said once the new regime is implemented, the harassment of businesses by different authorities will end and India will be one rate for one commodity throughout the country.
He said the GST Council, comprising Finance Ministers of Union and states, had agreed to take a decision on bringing real estate within the ambit of the new tax regime within a year of its rollout.
On the impact of GST on prices, Jaitley said: "Today you have tax on tax, you have cascading effect. When all of that is removed, goods will become slightly cheaper".
On why the Council has decided on multiple GST rates, Jaitley said one rate would be "highly regressive" as "hawai chappal and BMW cannot be taxed at the same rate".
He said currently food articles are not taxed and those will continue to be zero rated under the GST. All other commodities would be fitted into the nearest tax bracket.
The GST Council has recommended a four-tier tax structure -- 5, 12, 18 and 28 percent. On top of the highest slab, a cess will be imposed on luxury and demerit goods to compensate the states for revenue loss in the first five years of the GST implementation.
However, the Central GST (CGST) law has pegged the peak rate at 20 percent and a similar rate has been prescribed in the State GST (SGST) law, which takes the peak rate to 40 percent which will come into force only in financial exigencies.
Jaitley said the cess would be transient for a period of 5 years so that the proceeds can be utilised to compensate the states.
The Congress objected to the passage of four GST-related bills in Lok Sabha, claiming that it was in "contravention of Parliamentary sovereignty".
"We support (GST) but the nuances and manner in which it (GST supporting laws) is passed is in contravention of Parliamentary sovereignty," Congress senior leader M Veerappa Moily said, adding that by passing the bill in its present form the members shall put the "last nail in the coffin" of their own sovereignty and legislative independence.
"It is a historic day where Parliament's sovereignty has been removed insofar as taxation is concerned and they have no power to abrogate...This is again a big assault on the federal structure of the Constitution of India," he said.
Moily had during the Lok Sabha debate reminded that the BJP had opposed the implementation of the reform tooth and nail when the UPA first introduced it. The delay in implementation resulted in a loss of Rs 12 lakh crore for the country.
Experts point out to concerns
Meanwhile, tax experts welcomed the move but also pointed out a few areas of concern. Hailing the passage of the Bills in one day, Pratik Jain, partner and national leader - indirect tax at PwC India, termed it a great achievement for the NDA government. "However, the government should perhaps note the concerns raised by Opposition, particularly those relating to tax administration, impact of multiple rate structure and possible impact on sectors which are to be excluded from GST like agriculture and petroleum," he said.
MS Mani, senior director – indirect tax, Deloitte Haskins & Sells LLP, said the passage of the Bills sets the stage for the definitive introduction of get in the next few months.
"The GST rules and rates should now be decided very quickly so that business can be prepared," he said.
Many members in the Lok Sabha also raised the issue of preparedness during the debate. Saugata Roy of the Trinamool Congress urged the government to push the deadline to 1 September in the interest of the small businesses.
The general consensus among the experts have been that it is better to extend the deadline by two months for a smooth rollout.
(With inputs from PTI)
Updated Date: Mar 30, 2017 07:54 AM