New Delhi: The Goods and Services Tax bill faced surprise resistance in the Lok Sabha as the Opposition found unexpected allies to protest against the bulldozing of the bill. The bill is expected to benefit consumer states such as Kerala and lead to an expansion in the country’s gross domestic product by unifying a host of central and state taxes.
The Constitution amendment bill moved in the Lok Sabha on Friday is hailed as the biggest tax reform in independent India.
The Opposition walked out in protest of the government decision not to refer the bill to the standing committee. The AIADMK and Biju Janata Dal, which had been soft on the government, joined the protest. If the Centre is not able to win over the Opposition, they will find it all the more difficult to initiate the reform as it does not have a majority in the Rajya Sabha.
The new legislation will benefit the state governments and the centre alike, Finance Minister Arun Jaitley said in his introductory speech seeking the approval of the house for the bill.
The 12-year-old legislation was started during the tenure of the Vajpayee government. The UPA II government formed a high-power committee in 2008 which was instrumental in reaching a consensus with states. Kerala Finance Minister K.M. Mani is the present chairman of the committee.
Jaitley struggled to overcome the united Opposition’s protest. He could not give a clear answer to the allegations that the government was bulldozing the legislation without introducing it in the business advisory committee and consulting the Opposition. Congress circles suggested that government hastened to move the bill on a Friday to divert attention from a farmer’s suicide in New Delhi.
Though Congress members Mallikarjun Kharge and K.C. Venugopal demanded that the bill be referred to the standing committee as it was entirely different from the bill the UPA government introduced in 2011, the Speaker rejected the demand.
The Speaker, however, had to soften his stand after Deputy Speaker Thambi Durai (AIADMK), Bhartruhari Mahtab (BJD), Sougata Roy (Trinamool Congress) and P. Karunakaran (CPM) joined the chorus. He said a debate could be allowed after the bill was moved.
Jaitley said this was perhaps the most discussed bill in independent India. The talks that started 12 years ago are still continuing. A parliamentary standing committee discussed the bill during the UPA II government’s tenure. The high-power committee, chaired by Mani, has also completed discussions on the bill. UPA was bound to support the bill, he said.
Just like the value-added tax, GST will not lead to revenue loss for the states. The central government will compensate any loss the states incur in the initial three years of the new tax regime. About 75 per cent of the losses will be compensated in the fourth year and 50 per cent in the fifth year. From the sixth year the central government will not have to compensate the states as there will be no losses, Jaitley said.
The GST Bill envisages equal rights for the central and state governments to tax goods and services. GST would subsume excise duties, additional duties, central surcharges, central and state sales tax, service tax, luxury tax, state-imposed cess and surcharges.
India’s GDP is expected to leap 0.9 to 1.7 per cent with the rollout of the GST. As the number of taxes comes down, so does the associated administrative expenses. Tax revenue will go up with the strengthening of the tax base. Kerala and other consumer states will have additional revenue. A major share of taxes in the services sector will come under the purview of the states.
Over 150 countries have introduced GST in various forms.