Rajya Sabha elections raise hope of GST Bill passage: Report

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Recent elections of the Rajya Sabha increase probability of Goods and Services Tax (GST) Bill being cleared by the upper house of the Parliament. If the Bill gets cleared in the Rajya Sabha, the roll out of GST could be by 1 April 2017, says Kotak Institutional Equities Research in a note. West Bengal Chief Minister Mamata Banerjee on Tuesday assuring support instructed state Finance Minister Amit Mishra and Chairman of the Empowered Committee of Finance Ministers on GST, to ensure passage of the Bill in the ensuing monsoon session of Parliament.
“A constitutional amendment bill requires the support of two-thirds of the members present and voting, which means the GST bill would need the support of 161 out of 241 members. If the opposition is able to garner 81 members, it can stall the legislation. The known opponents of the bill, Congress -58, Communist Party of India (Marxist) (CPI-M) -8, Dravida Munnetra Kazhagam (DMK) -4 and Communist Party of India (CPI) with single member are expected to have, between them, 71 members of Parliament (MPs). All India Anna Dravida Munnetra Kazhagam (AIADMK)’s 13 MPs will play a critical role. We do not count MPs that were nominated by the previous United Progressive Alliance (UPA) government in this list. Parties such as Janata Dal -United (JD-U) with 10 MPs and Rashtriya Janata Dal (RJD) with four are in alliance with the Congress in Bihar, although the government there is not dependent on continued support of INC. If all the regional parties were to side with the government, the (GST) Bill can pass in the Rajya Sabha. Even abstentions will work in favour of the opposition,” says the research report.
In December 2015, a government panel headed by the chief economic adviser had recommended three broad rates for GST—17-18% as the standard rate for most goods and services, 12% for essential items and 40% for luxury items, and tobacco. Precious metals will be taxed at 2-6%. More importantly, the ‘reclassification’ of the current huge number of indirect taxes into one tax and rates into three rates broadly for most goods and services will result in simplification of India’s complex indirect tax system.
Kotak says, “A standard rate of 17%-18% (or lower) is possible only if various exemptions and low tax rates removed or reduced from the onset of GST and the tax base expands with time. Some of the bigger consumption items such as alcohol, electricity and petroleum products are being kept out of GST; precious metals will be taxed at 2-6% as per the panel. The panel’s computed revenue-neutral rate (RNR) of 15-15.5% highlights the large number of items that have nil or low indirect tax currently since the current indirect tax rate on most goods is over 20% (cumulative impact of central excise duty of 12.5% and state value added tax (VAT) of 12.5%; the bases for computation of excise duty and VAT are different though) and on services 15%.”

“We note that the current tax rates (total indirect taxes) on most goods and services are quite different from the proposed standard rate of 17%-18%. This may create volatility in stocks and speculation about the actual rates until the rates are finalized. The final decision on the rates and the classification of items (by rates) will be taken later by the GST Council once the GST Constitutional Amendment Bill is cleared in the parliament and ratified by at least 50% of the states. The GST bill with specific details on rates and items will be enacted later by the parliament and all the state legislatures once there is consensus on the structure and specifics of GST. We expect GST to be implemented from 1 April 2017,” the research note concluded.

Source:http://www.moneylife.in/article/rajya-sabha-elections-raise-hope-of-gst-bill-passage-report/47145.html

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