GST: The ayes have it, Constitution Amendment Bill passed in Rajya Sabha

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GST Bill highlights from Parliament

9.40 pm: GST Amendment Bill passed in Rajya Sabha. House adjourned till 11 am tomorrow.

9.20 pm: “Some members are disappearing and some are appearing even though the doors are closed. There is some magician in the house,” the Deputy Chairman quipped.

9.00 pm: Adding to the amusement of the members in the house, the number of MPs present in the house and voting kept fluctuating neutered 200 and 205. The lobbys had been cleared and this meant more MPs couldn’t have come in during the voting. This prompted the Deputy Chairman to say he cannot be blamed and you will have to ask systems. He also kept repeating that all results were subject to correction.

8.50 pm: Amendments on GST Bill being put to vote.

8.45 pm: We will do everything in compliance of the constitution. We will not do anything in contravention to the constitution: Arun Jaitley on Chidambaram’s demand to introduce CGST and IGST as financial bills.

8.40 pm: “He (Aurn Jaitley) left one thing unsaid. It is a unanimous demand of this House that the CGST and IGST Bill are brought before us as a financial bill and not as a money bill,” says Chidambaram.

8.35 pm: AIADMK to abstain from voting on the GST Bill. Stage walkout.

8.30 pm: On Entry tax and Octroi: “When they are subsumed into the state GST, its kitty would expand but the fear is that the municipality would be starved of funds. There are various kinds of solutions that are possible. The state government can be empowered to raise their own taxes. A solution within the framework of the GST is workable,” says Jaitley.

8.20 pm: “The former finance minister using the word clumsy drafting is a bit extreme. In a non-GST system, if I collect some tax for Tamil Nadu, they have to wait till the parliament passes an appropriation bill. Now, the appropriation will take place outside itself,” says Jaitley.

8.15 pm: Even with change in govt (at the Centre), states don’t trust the Centre, says Jaitley.

8.10 pm: To implement GST is a headache, to be a former finance minister is a luxury, says Jaitley.

8.05 pm: “The GST will bring in three developments 1) The system will be more efficient and compliance will be met. Avoidance is going to be difficult because you will be detected at some stage or the other. 2) There will be no cascading effect on tax on tax 3) There are few goods on which the tax might be higher or lower. 54 per cent of the CPI basket is tax exempt. 32 per cent are taxed at a lower rate. Only 15 per cent are taxed at the standard rate,” says Arun Jaitley.

8.00 pm: “The 2011 bill required consensus. The intention was good, but implementation was very difficult. Now, states have 2/3rd of the vote and Centre 1/3 rd. The states also have a veto on the Centre. The GST council effectively represents us. Today if the GST council makes a suggestion, almost every political party in some part of the country would be directly represented or in the future is directly represented. The powers of parliament are not taken away,” says Arun Jaitley.

7.57 pm: The states admittedly have to be stronger but the union also has to be there. India is not a confederation of states but a union of states: Arun Jaitley.

7.30 pm: Anand Sharma, INC

“Dialogue on GST incomplete without talking about its origin. Then BJP-led Opposition said Congress’ GST Bill push would weaken states, even called it ‘unconstitutional’. Would’ve been better had there been better dialogue when Finance Minister Chidambaram tried to take GST Bill forward. Still believe it was a momentous, historic moment for the Congress.

“After 2014, Chief Minister Modi became PM Modi and his thoughts on GST changed. Would’ve been nice if he were here today. Would’ve been nice if the present government acknowledged that UPA government’s concerns on GST were meant for good of nation.”

On GST rate cap: “It is important that the GST rate should not be more than 18 per cent. Without mentioning the tax rate in the law, no tax can be collected. Finance Minsiter Arun Jaitley, you being a distinguished lawyer, the issues raised by us had merit. We were correct. When we talk about 18 per cent, it is not something that fell from the sky. Your CEA mentioned it in his report. The 13th finance commission also recommended the same. There must be a reason why they recommended the rate.”

6.40 pm: D Raja, CPI

“It is very clear we are yet to understand what would be the future. The whole effort is to create a common economic zone in the market. We are going to enter an unknown terrain. We are not very clear on the consequences. Interests of the working class must be kept in mind. The contentious issue is about capping of the GST rate. Centre has to ensure that the indirect taxation doesn’t adversely affect the tax payers. The finance minister has to explain further.

“The other issue is how to maintain the fiscal federal structure. The states are worried that their rights will be curbed and fiscal rights taken away. It is for the state govt now to plan how local bodies function. The GST council is in favour of the union government. The weightage should be 1/4th to Centre and 2/4th to states. When we move to a new tax regime. The states are really apprehensive and how the Centre will address these issues. Once this bill is passed, you will have to bring the following bills: Central GST, State GST and IGST. Are we clear about the contents of the bill or their implications?”

6.10 pm: Rajeev Gowda, INC

“Everyone is focusing on 18 per cent cap when we already are at 15.8 per cent. If we go ahead and add this rate to the taxation, it will lead to inflation. We cannot break the backs of the poor. Service sector is the fastest growing industry, we should allow it to grow without burdening it.

On administrative reforms

“We also need to look at administrative reforms before implementing the GST. We may need a GST service like the IRS or a whole bunch of newly trained people to handle this.”

4.55 pm:

“Both at the central and the state level, the transition towards GST model will be challenging. The principle of equity must be kept in mind while deciding on revenue neutral rate,” NCP MP Praful Patel said. Patel cited the example of the BMC where the octroi collection itself is more than the budget of several small states in the country.

Patel also said the bill has ramifications beyond just amending the Constitution, therefore urging the government to introduce them as finance bills and not money bills. Patel said there was no reason for the government to fear withdrawal of support from the Opposition parties in the House.

4.10 pm: We must protect rights of states, says Yechury

CPM leader Sitaram Yechury quoted the Constitution saying India is a Union of States and the rights of the states are fundamental to the Constitution. The CPI(M) leader also quoted Dr Babasaheb Ambedkar who spoke about taxation issues and the impact that it would have on provinces. “Are we going to reduce the states to come to Centre with begging bowls to ask for money?”

“How do we protect the rights of states? We (Rajya Sabha) are the council of states. I urge the Finance Minister to address this issue, and a provision be made when we discuss the GST bill,” Yechury said.

He also said the tax rate of 24 per cent will cripple most of the people of our country.

On the issue of dispute redressal, Yechury said greater thought must be given to it and it must be spelt out more concretely when it comes out for discussion.

He also said that the GST bill is one of major importance and it should come back for consultation and deliberation. The bills should be brought back as finance bill and not as a money bill.

Yechury also said it was good that we’ve got rid of colonial hangover. Westminster has three colours – green, red and royal blue. We got rid of royal blue, which is reserved for the Queen of England, by becoming a republic. We still have green and red, and when something is of concern to our people, we will raise the red flag. The interest of the people are supreme.”

4.00 pm: JDU’s Sharad Yadav urged the government not to pass the GST bills as money bills but as finance bills saying there was no difference between the two Houses of Parliament. He also said that local bodies revenue should be taken care of by the new legislation. Sharad Yadav hoped that the new bill will help reduce corruption in the country.

3.40 pm: Derek O’Brien of the Trinamool Congress Party is speaking in Rajya Sabha

“It’s often confusing whether the BJP and Congress is supporting or not supporting the GST bill. Unlike our party, which has promised the GST in its manifestos. I feel like a teenager in the presence of these senior lawyers.”

“GST can also be interpreted as Girgit Samjhauta Tax – it’s like a ping-pong match between the two sides – (BJP and Congress).”

O’Brien is now quoting what the two parties had said in the past on the GST bill, saying it was important that the politics of the GST bill be discussed, because for two years, two houses were stalled by the BJP over GST and FDI.

He also took on Chidambaram, saying his colleagues in the Select Committee saw the Go Slow Tactics of the Congress Party. “Only having an idea of GST is not good, there has to be implementation,” O’Brien said.

Derek O’Brien also listed countries that have come back to power and suffered defeat after governments passed the GST bill, comforting both parties that it was a fifty-fifty chance.

3.25 pm: AIADMK objects to GST Bill, says it violates the Constitution

A Navaneethakrishnan of the AIADMK spoke in Rajya Sabha, urging that the bill not be cleared by the House.

Here’s a summary of what he said:

“It violates state’s fiscal autonomy and also because of this bill there is a permanent revenue loss to the state of Tamil Nadu.

Our Chief Minister Amma has produced a memorandum to the Prime Minister and a dissent note has been given to the select committee.

Democracy and federalism are the basic features of the constitution. The GST legislation violates the right of the Tamil Nadu Assembly to pass laws on the levy of taxes. He said it violates article 21 of the constitution – that deals with personal liberty. The bill is not a fairly enacted law and says it violates the federal structure of the constitution. The composition of the GST council is also unfair and it does not take into consideration the diversity of India.”

The AIADMK MP also said petroleum products must be kept out of the bill permanently if ‘people were to be saved’. Rs 9270 crore will be the loss Tamil Nadu will have to suffer, he said, urging the government to change the wording of the revenue compensation from ‘five years’ to ‘not less than five years’ so as to compensate the state even beyond that period if there was a loss.

3.10 pm: Naresh Agarwal of the Samajwadi Party is speaking in the House. Agarwal raised concerns on the redressal mechanism in the GST council. He said it appeared as if the union government had the veto power in the council as it had a majority representation. Agarwal also alleged that the government was refusing to cap the rate as its intentions were to raise the tax. Agarwal said the government should make use of latest technology to ensure that taxes meant for the state are given to the state and those earned by the Centre are sent to the union government.

He also questioned how it was possible for the union government to get the bill passed by 1 April if it has to pass by several state governments. He also cautioned the government not to make the bill a money bill but to ensure it passes as a finance bill. Agarwal demanded that Jaitley make an assurance on the floor of the House that it will not be a money bill.

2.55 pm: BJP’s Bhupendra Yadav is speaking in the House. He congratulated the members of the select committee that reviewed the bill and said bill help market India as one. “GST will make India one from 29 States,” he said.

2.50 pm: Cap the GST rate, says Chidambaram

GST is supposed to be a more efficient tax. If the union captures it, it can’t escape state tax and vice versa.

The CEA, working with experts, arrived at an RNR of 15-15.5 and then suggested the standard rate of 18. The standard rate must be 18. You can then have a 18 minus and an 18 plus.

When we say cap the tax rate, we’re saying this rate should not be changed by the whims of the executive. A rate must only be changed with the approval of Parliament. It ought not to be changed at the whim of the executive.

“Charging 24 and 26 per cent on GST defeats the purpose of the bill. Your services represents 57 per cent of the GDP. It is hugely inflationary and there will be a huge backlash if you raise the service tax rate from 14.5 to around 24.”

“On behalf of my party, we demand the standard rate of GST – which applies to over 70% of the goods and services – should not exceed 18 per cent.”

Chidambaram also urged the government to bring the CGST and IGST bill as a finance bill and not a money bill, saying both Houses must be allowed to vote. “I want an assurance from Finance Minister that GST is brought as a financial bill and not a money bill,” Chidambaram said in Rajya Sabha. The former finance minister has concluded his remarks.

2.40 pm: Keep the indirect tax as low as possible, says Chidambaram

“The heart of the bill is what will this tax be? It’s not an issue between the FM and state FMs. It’s about the people of this country. Every Union FM and state FM wants to maximise revenues. But please remember we are dealing with an indirect tax – which is a regressive tax – that falls equally on the rich and poor. Whether a rich man or a poor man buys a softdrink, he is paying the same price. It should be kept as low as possible,” Chidambaram said, urging members to read the CEA’s report on the issue.

“World over the tax rate is between 14.1 and 16.8 per cent. The idea is, being an indirect tax, should be kept as low as possible.”

We need to keep taxes low but at same time protect revenues of union and state governments – we must discover a revenue neutral rate (RNR). You derive an RNR and then you arrive at a slab rate.

2.25 pm: No such thing as a perfect GST bill, says Chidambaram

It has taken us 11 years to arrive at this point but the journey has been a learning experience for everyone.

The Congress Party was never opposed to the idea of a GST bill. We are not discussing the idea of a GST bill. Just as the 2011 GST bill introduced by (Pranab) Mukherjee, the 2014 bill is being opposed. There can be no such thing as a perfect bill and I don’t think anyone from the govt will claim it is. But when we found that there were too many flaws in the bill and that they could be fixed, we decided not to support the bill.

There are four major issues, he said. For one, there are issues in how much money will be deposited in the consolidated fund of India. He said it was a case of ‘clumsy drafting’. “Revenue has to either go into a consolidated fund of India or state. The draft is clumsy and leaves this unanswered.”

Chidambaram thanked the government for dropping the 1 per cent tax imposed on states. “One of issue was how can you, in destination based tax, have provision like some states being allowed to impose add. 1 % tax?” Chidambaram also raised questions on the dispute redressal mechanism in the draft bill, urging Jaitley to strengthen the provision by moving an amendment. Disputes arising otherwise – outside of GST – (among states) should also be added.

“GST doesn’t only stand for Goods and Services Tax, it also stands for Good Sense Triumphs, I thank you for accepting our demand,” Chidambaram said.

2.17 pm: Former finance minister P Chidambaram is addressing the debate

Chidambaram began his speech saying he welcomed the ‘friendly and conciliatory tone’ of the finance minister, saying it has changed over the last few weeks and that could augment well for the bill.

Chidambaram said when he was FM, he tried to pass the bill with the support of the Opposition party (then BJP) and he failed. “In the last few months the government tried to pass the bill without the support of the opposition and it failed, and I’m glad it failed,” Chidambaram said, adding that he hoped that the government will pass the bill today after much serious discussion and debate.

2.15 pm: Jaitley said disputes in the GST bill will be resolved by the GST council. If the council is unable to resolve certain issues, it will set-up a dispute redressal committee which will look into such cases.

2.12 pm: This is federalism at play, says Jaitley

Detailing the duties and functions of the GST council, Jaitley said both the state governments and the Centre will have powers to veto each other – signifying that it was a federal structure in place. Jaitley said the various legislations and IT infrastructure are already being worked on and he hoped that the bill will help empower states and also increase revenue of both — states and the Central government.

2.00 pm: As the House resumed, Finance Minister Arun Jaitley moved that the Constitution 122nd Amendment bill be moved and passed by the Upper House. Jaitley spoke of the reservations various state governments had in the course of the drafting of the bill. “The GST bill is the most reformative tax reform,” Jaitley said in Rajya Sabha, adding that the reform will give the country an economic boost.

“There has been a large consensus discussion on this bill and that is necessary for a bill of this kind,”Jaitley said, adding that since the bill creates a huge impact across the country and states it was necessary that a consensus was arrived at.

Jaitley also thanked leaders of all political parties and specifically Leader of Opposition in Rajya Sabha Ghulam Nabi Azad for helping the government arrive at a consensus. He also thanked finance ministers of various state governments for their support.

1.05 pm: Here’s an update from the markets — Sensex down by 263 points, currently at 27,718.65, Nifty at 8555.10

1.00 pm: Rajya Sabha has been adjourned following the conclusion of Question Hour. The House will reconvene at 2 pm, when Finance Minister Arun Jaitley will table the GST bill.

12.30 pm: Looking forward to GST bill, says FICCI

Industry body FICCI said it is looking forward to introduction of the much-awaited Goods & Services Tax (GST), saying it would be a very significant step in the field of indirect tax reforms in India. The 2014 bill authorised GST Council to decide upon the modalities for resolution of disputes. “From the consumer point of view, the biggest advantage would be in terms of a reduction in the overall tax burden on goods, which is currently estimated at 25 to 30 per cent. Introduction of GST would make Indian products competitive in the domestic and international markets. Studies show that this would instantly spur economic growth,” FICCI said.

11. 55 am: What are the benefits of GST?

Biggest benefit is that it will disincentivise tax evasion. If you don’t pay tax on what you sell, you don’t get credit for taxes on your inputs. Also, you will buy only from those who have already paid taxes on what they are supplying. Result: a lot of currently underground transactions will come overground.

lower tax rates will follow from GST covering all goods and services, with tax only on value addition and set-offs against taxes on inputs/previous purchases. Right now, we have more tax on fewer items; with GST, there will be less tax on more items. Ideally, no good or service should be tax-exempt, as this will break the input tax chain.

11.50 am: What will the Bill in Parliament today do?

The GST bill basically seeks to amends the Constitution to empower both the Centre and the states to levy GST. This they cannot do now, because the Centre cannot impose any tax on goods beyond manufacturing (Excise) or primary import (Customs) stage, while states do not have the power to tax services. The proposed GST would subsume various central (Excise Duty, Additional Excise Duty, service tax, Countervailing or Additional Customs Duty, Special Additional Duty of Customs, etc.), as well as state-level indirect taxes (VAT/sales tax, purchase tax, entertainment tax, luxury tax, octroi, entry tax, etc). Once the Bill is passed, there will only be a national-level central GST and a state-level GST spanning the entire value chain for all goods and services, with some exemptions.

11.40 am: NDA ally Shiv Sena has a question for the BJP

Speaking to reports, Shiv Sena MP Sanjay Raut said: “Shiv Sena’s stand is clear, how will you compensate loss that will be caused to BMC through GST?”  The BMC or Brihanmumbai Municipal Corporation is the richest municipal body in Asia. Its annual budget is more than the budget of some of India’s smaller states.

11.30 am: GST Bill — What will it replace?

As Rajya Sabha continues with Question Hour, we take a look at what the new tax reform proposes to replace. The Central taxes that will be replaced by the GST are: Central Excise Duty, Duties of Excise (medicinal and toilet preperations), Additional duties of Excise (goods of special importance0, Additional duties of Excise (textile and textile products), Additional duties of Customs (commonly known as CVD), Special Additional Duty of Customs, Service Tax, Cesses and surcharges in so for as they relate to supply of goods or services.

Sate taxes that the GST will subsume — State VAT, Central Sales Tax, Purchase Tax, Luxury Tax, Entry Tax (all forms) Entertainment Tax (not levied by state bodies), Taxes on advertisements, Taxes on lotteries, betting and gambling, state cesses and surcharges.

 

11.00 am: Rajya Sabha convenes for the day and it will begin with Question Hour. Finance Minister Arun Jatiley is likely to table the GST Bill at 2 pm, after Question Hour is over. Several MPs are demanding a discussion on women security across the country. Deputy Chairman PJ Kurien said the issue can be discussed after due notice is given.

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Union Finance Minister Arun Jaitley Wednesday moved that the GST Bill – The Constitution (One Hundred and Twenty-second Amendment) Bill, 2014 be discussed and passed in Rajya Sabha. The Treasury and Opposition benches are currently debating the bill for an allotted time of five hours.

Speaking in Rajya Sabha, Congress MP and former finance minister P Chidambaram urged the government to cap the GST rate at 18 per cent. The Congress Party also imposed a condition on the government that Finance Minister Arun Jaitley must assure the House that the GST related bills will be finance bills and not money bills, as they ought to be discussed in both Houses.

Almost all Opposition MPs who spoke during the discussion reiterated Chidambaram’s demand saying both Houses should be treated equally.

A discussion on the GST bill comes after months of discussions between the ruling party and the opposition – with both sides meeting multiple times to negotiate amendments. The bill was passed by Lok Sabha in May, 2016 but in the Upper House, it was referred to a 21-member Select Committee, which submitted its report in July 2015. The bill has not been tabled in Rajya Sabha since then owing to several key objections raised by opposition parties. Here is all you need to know about the GST bill

If Rajya Sabha does indeed pass the bill today, the bill, with amendments, will go back to Lok Sabha inorder to get the amendments cleared. The BJP-led government has a majority in that House so there will not be an issue in getting it cleared. Once both Houses clear the bill, all 29 states and UTs will have to pass their state GST(SGST) Acts. Arun Jaitley is hopeful of rolling out the new taxation law by April 1, 2017.

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