GST Bill passed in Lok Sabha; faces RS test on Thursday


Goods and Service Tax (GST) Bill, a key reforms measure seeking to create a national market, was approved by the Lok Sabha with support from parties like BJD and TMC and a walkout by the Congress after a promise that the recommended tax rate of 27% will be diluted.

While the Constitution Amendment bill was approved by the mandatory two-thirds majority with ease, there are question marks over its fate in the Rajya Sabha where the ruling BJP-led NDA lacks majority. The Upper House is to take up for consideration the GST Bill on Thursday.

Congress and other parties have demanded that the Bill be referred to a Standing Committee, which has been rejected by Finance Minister Arun Jaitley. The Bill will then need ratification of more than half of 29 states before scheduled roll out in April next year.

“The whole country would become a single market and therefore it would give a necessary fillip as far as trade is concerned,” Jaitley said while winding up a debate in the Lok Sabha. Parties like TMC and BJD had reservations over the impact of the GST on state revenues.

Jaitley promised the states that they would be fully compensated for any loss of revenue arising from implementation of GST. “Our clear understanding with the states is, in a tapering manner the losses incurred by the states will be fully compensated for five years,” he said.

The GST, the biggest indirect tax reform since 1947 which is expected to boost manufacturing, will replace central taxes like excise duty and service tax and state levies such as sales, value-added, entertainment and purchase taxes. All entry taxes like octroi will also be subsumed under GST.

All goods and services, except alcohol, will be covered by GST. Petroleum products will come under GST but the decision over when to start levying the new tax has been left to the GST Council to decide.
GST, which was first mooted 12 years ago but couldn’t be approved as states feared curb on their fiscal powers, would boost economic growth by up to 2 %, Jaitley had said. While the GST panel had set the tax rate at 27 %, well above the global average of 16.4 %, Jaitley said the proposed rate was “too high” and needed to be “much more diluted”.


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