The NDA government couldn’t get the Goods and Services Tax (GST) Bill converted into a law during the Budget Session. The government tried to even extend the session by a few days in order to push the bill through but the opposition and its minority stature in the Rajya Sabha proved to be road blocks.
Finance Minister Arun Jaitley has said that he hopes the Bill is passed during the Monsoon Session of the Parliament.
The GST Bill was first introduced in 2011 but has always been on the backburner as states did not cozy up to the fact that their revenues might decrease once GST becomes a law.
The Bill has been amended to suit their reservations. However, in the process, many say that the Bill in its current form will prove to be ineffective.
What are these changes that the GST Bill has incorporated?
In the latest Bill, the provision which permits states to tax entry of goods into local area for use or sale has been deleted. These goods are put to sale only to the extent imposed by a Panchayat or Municipality.
The committee reasoned this move by saying that the states must be empowered to collect entry tax for distribution to local bodies instead of leaving it to be collected by different local bodies
Analysing the current Goods and Services Tax Bill with previous one which was passed in 2011, it has many provisions which are deleted by the Bill.
In the previous Bill, the Constitution had imposed restrictions on states in taxation of goods that were declared by the Parliament. These goods were by law termed to be ofspecial importance in interstate trade and commerce.
Comparison of the 2014 GST Bill with the 2011 Bill
|2011 Bill||2014 Bill|
|The Bill defined GST as any tax on the supply of goods or services, except taxes on the supply of:
(i) petroleum crude;
(ii) high speed diesel;
(iii) motor spirit (petrol);
(iv) natural gas;
(v) aviation turbine fuel; and
(vi) alcoholic liquor for human consumption.
|The Bill defines GST as any tax levied on the supply of goods, or services, except taxes on the supply of alcoholic liquor for human consumption.|
|The Bill provides for the creation of the Goods and Services Tax Dispute Settlement Authority to adjudicate disputes between the central government and state governments:
(i) resulting in any loss in revenue; or
(ii) affecting the harmonized structure of the tax.
|The Bill has deleted the provision that creates a Goods and Services Tax Dispute Settlement Authority.|
|The Constitution imposed restrictions on states in taxation of goods that were declared by Parliament, by law, to be of special importance in inter -state trade or commerce.
|This provision has been deleted by the Bill.|
|The Bill made two changes:
(i) It removed the goods listed under A. 366 from within its ambit; (related to tax on the sale or purchase of goods)
(ii) It specifies that this provision was not to apply to a state law insofar as it imposed GST.
|These changes have been removed.|
|It allowed states to tax entry of goods into a local area for use or sale only to the extent levied by a Panchayat or Municipality||The Bill deletes the provision which permits states to tax entry of goods into a local area for use or sale only to the extent levied by a Panchayat or Municipality.|
Credits: PRS Legislative Research
The Bill had removed the ambit on certain products which were related to tax on the sale or purchase of goods.
According to the PRS legislative Research report, the concerned Committee mentioned that this change is made to address the states’ concerns on loss of fiscal autonomy.
There are no changes made to the taxes on the intrastate trade of petroleum crude, diesel, natural gas and alcohol.
According to a report, the states will continue to collect sales tax or Value Added Tax on petro products.
Few changes that the new Bill has:
|1. The Bill adds a provision which allows the GST Council to make recommendations related to apportionment of IGST.|
|2. The Bill states that an additional tax of not more than 1% should be levied on the supply of goods which enter the state.
Such additional tax shall be directly assigned to the states from where the supply originates.
This shall be implemented for a period of two years, or as recommended by the GST Council.
Credits: PRS Legislative Research
The provision that creates a Goods and Services Tax Dispute Settlement Authority has also been deleted form the current Bill. Previously the GSTDSA was created to judge the disputes between the central government and the state government which resulted in the loss in revenue.
This move was justified by the Committee by saying that the GSTDSA would have overruled the power of the Parliament and the State legislatures.
In addition to the 2011 Bill which stated that only the centre would levy and collect goods and services tax on supplies in the course of interstate trade or commerce, the 2014 Bill included a provision which includes that the GST Council would also make recommendations on the principles that are formed to govern the place of supply.
Furthermore, the states will be allowed to collect an additional tax of not more than 1% on the goods that enter the state.
This tax will be directly assigned to the states from the supply originates, according to the PRS Legislature report on GST.
This is being done to simplify and ensure a smooth functioning between the states.
Justifying the changes made in the current Bill, Prime Minister Narendra Modi said, “The earlier bill was brought in a hurry. Almost all the Chief Ministers have told me to amend the Bill.”
Chaudhary Birender Singh, Union minister of rural development said that this bill is for the development of the country and it is for the interest of the farmers.