New Delhi: Parliament today cleared the decks for the rollout of the historic Goods and Services Tax (GST) from July 1 as it approved four supporting legislations to usher in the one-nation-one-tax regime.
The Central GST Bill, 2017; The Integrated GST Bill, 2017; The GST (Compensation to States) Bill, 2017; and The Union Territory GST Bill, 2017 were returned by the Rajya Sabha by a voice vote as all parties were on board.
A number of amendments moved by some opposition parties were negated in the House where the ruling NDA is in a minority.
Significantly, Congress member Jairam Ramesh did not press an amendment he had proposed, saying he had been advised by former Prime Minister Manmohan Singh against it for the sake of consensus.
The Lok Sabha had passed these bills on March 29. State Assemblies will now have to pass the States GST Bill after which the new indirect tax regime can be rolled out from the targeted date of July 1.
Replying to the 8-hour-long debate, Finance Minister Arun Jaitley also gave credit to the previous UPA government for the GST.
"I have no hesitation in conceding that it is not a bill for which one government, one person or any individual should take a credit. It is a collective property in which states, political parties, central government, successive governments have all contributed to it.”
"I have no difficulty in sharing the credit for this with everyone, particularly state governments because we are now creating a situation which was originally not anticipated in the Constitution," said Jaitley, who went to the opposition benches to thank them, particularly Manmohan Singh, for the cooperation.
The GST, the biggest taxation reform since Independence, will subsume central excise, service tax, VAT and other local levies to create an uniform market.
The GST is expected to improve tax revenue collections and boost the growth.
Responding to concerns expressed by the members, Jaitley insisted that the GST will not lead to inflation.
The powerful GST Council, comprising Centre and states, has recommended a four-tier tax structure -- 5, 12, 18 and 28 per cent. There will be cap rate of 40 per cent, Jaitley said. The GST rates are to be discussed by the GST Council on May 18-19.
Jaitley said once the new regime is implemented, the harassment of businesses by different authorities will end and India will be have one rate for one commodity throughout the country.
On top of the highest slab, a cess will be imposed on luxury and demerit goods to compensate the states for revenue loss in the first five years of GST implementation.
Jaitley said the successive governments have contributed towards the GST and no one person can take credit for it. "This Bill, I have no hesitation in conceding, is a collective property," he said.
With implementation of the GST, revenue of the Centre, the states and the industry and trade must benefit, he added.
Jaitley said the GST Council, comprising Finance Ministers of Union and states, had agreed to take a decision on bringing real estate within the ambit of the new tax regime within a year of its rollout.
The Finance Minister said the Chief Economic Advisor had given a detailed presentation to the states on the benefits of inclusion of real estate in the GST. "I was in favour of real estate, Delhi government was in favour," Jaitley said.
The GST Council will also take decisions regarding inclusion of petroleum products and alcohol in the GST network, one by one, in the foreseeable future.
Regarding audit by the CAG, he said the apex auditor draws powers from the Constitution and can scrutinise whether the respective departments are working according to the norms.
On why the Council has decided on multiple GST rates, he said a large number of products are zero rated, while the rest are in the slabs of 5 per cent, 12 per cent, 18 per cent and 28 per cent.
With regard to agriculture products, the Finance Minister said those farm products which are exempt, will remain exempted. "The status quo will continue," he said, allaying concerns on this front.
Ancilliary products also will remain exempted, he added.
Currently food articles are not taxed and those will continue to be zero rated under the GST. Other commodities would be fitted into the nearest tax bracket, he said.
On top of the highest slab, a cess will be imposed on luxury and demerit goods to compensate the states for revenue loss in the first five years of GST implementation.
However, the Central GST (CGST) law has pegged the peak rate at 20 per cent and a similar rate has been prescribed in the State GST (SGST) law, which takes the peak rate to 40 per cent which will come into force only in financial exigencies.
Jaitley said the cess would be transient for a period of 5 years so that the proceeds can be utilised to compensate the states.
As regards Jammu and Kashmir, the Finance Minister said the law passed by Parliament will not apply to the state because of Article 370.
Jammu and Kashmir will have to legislate its own law and integrate with the GST regime, Jaitley said, adding the state government was working on this as it would benefit the people there.
On the anti-profiteering provisions, he said these are meant to ensure that the benefits of reduction in tax rates are passed on to the consumers.
Regarding concerns expressed by some members on the structure of GST Network, the IT brain of the GST, Jaitley said this had been thought over properly during the UPA government.
He said the present structure was designed to hire the best talent pool as the entity would be handling billions of vouchers every month.
The GSTN structure can be changed any time, he said but had a rider that he was not sure the flexibility envisaged would remain after a change.
In the current GSTN structure, the Centre and the states together hold 49 per cent stake and the rest is owned by private banks and financial institutions.
Earlier, participating in the debate on the Bills, CPI(M) leader Sitaram Yechury suggested that the powers of the Rajya Sabha, which is also known as the Council of States, were being undermined.
He stressed that the rights of the states should be protected in the implementation of the GST. "No decision in the GST Council can be taken without the concurrence of the Central Government. So what are the rights of states you are talking of? We cannot allow this to happen where the rights of the states cannot be protected and we in the Council of States declare ourselves impotent," Yechury said.
Satish Chandra Mishra of the BSP sought some relaxation, at least in the first year of GST implementation, saying if an offence is compoundable, it should not be non-bailable, especially when there is a provision for seizure.
NCP leader Praful Patel said the harsh penal provisions would destroy the economic climate of a country and therefore some of these issues need to be addressed "as we move forward with the GST's implementation".
Patel observed that the GST will lead to a lot of initial difficulties due to varying interpretations.
He said the Government must exercise its power to ensure that municipal bodies and states are compensated in a timely manner.
Patel said that one can understand tobacco and alcohol being kept out of the GST net but questioned why electricity is not included since states supply power to each other. He demanded that petroleum needs to be rationalised going forward.
He said there will be initial difficulties and rise in inflation as taxation will increase by atleast 2.5 per cent and this should not affect the demand consumption.
Yechury highlighted that "in all countries where the GST has been introduced, immediately there has been a spurt in inflation.
He said "Parliament cannot be bypassed" and protection for traditional producers like Khadi, rubber, handloom, coir, etc. must be ensured.
CPI member D Raja expressed concern over the interest of farmers in the GST and wanted the government to look into it. He also raised the issue of many welfare schemes in operation in Tamil Nadu and wondered what would happen to these schemes.
BJP MP Narayan Lal Panchariya said GST is a progressive step and the move was initiated during the Vajpayee government. In 2004, Congress tried but could not succeed because of the lack of clear policy, he said.
Making his maiden speech, Independent member Subhas Chandra said over the years, the poor have become poorer and the rich have become richer.
Chandra said the current taxation system is British legacy and the proposed GST is meant to reduce poverty.
Quoting Indira Gandhi's speech at the Congress meet at Mumbai in December 1985, Chandra said she had spoken about how the value system was declining in the party. She has told Rajiv Gandhi about how vested interest was raising its ugly head, he said.
Congress member Kapil Sibal said opportunities had come for Congress when the government legislated it, but "unfortunately" it slipped out of its hands. "We have cooperated with the government on GST," he said.
"The kind of GST we want is not the one which we have asked for. This GST will not achieve the objective we are looking for - one market, one GST. This GST has 4 markets not one market with varying rates of taxes," he said.
Opposing certain provisions of the GST, Sibal said, "We are making mockery of the system. The purpose of the GST is to 'ease of doing business' and not 'ceased of doing business'."
He said GST excludes tobacco, petroleum products, real estate, aviation which in terms of value it exclude 40 per cent of GDP in terms of value.
Sibal said it is anti-agriculture, anti-farmers, anti-industry and anti-business. However, at the end he said, "I hesitantly support it because something is better that nothing."
