The Good and Services Tax is the biggest indirect tax reform since 1947. The GST bill aims to transform India into a uniform market by subsuming all the indirect taxes and by breaking the current fiscal barrier between states. The GST tax will be levied on manufacture sale and consumption of goods and services. Currently, the indirect tax system in India is complicated with overlapping taxes levied by the Centre and the State separately. With the bill getting passed in Lok Sabha last May, it is stuck up in Rajyasabha where the ruling BJP government is in minority. The article deals with the issues of the bill that makes it stuck in the Rajya Sabha.
Why bill is not getting passed?
- The provisions of this Bill do not fully conform to an ideal GST regime. Deferring the levy of GST on five petroleum products could lead to cascading of taxes.
- The additional 1% tax levied on goods that are transported across states dilutes the objective of creating a harmonised national market for goods and services. Inter-state trade of a good would be more expensive than intra-state trade, with the burden being borne by retail consumers. Further, cascading of taxes will continue.
- The Bill permits the centre to levy and collect GST in the course of inter-state trade and commerce. Instead, some experts have recommended a modified bank model for inter-state transactions to ease tax compliance and administrative burden.
- The opposition are demanding that a cap on the GST rate be fixed on the Constitution Bill.The government says, it may not be possible to bring the provision on the cap in the Constitution Bill itself.
The GST is poised to spur the domestic competitiveness; With bill storming both the houses from 2009, and given the fact of great momentum built up over years, it is the right time that all the parties concerned should stop politicising and arrive at a consensus to pass the bill.