The Cabinet approves amendments to GST bill. The GST bill, intends to convert 29 states into a single market through a new indirect tax regime.
The amendments were taken up by the Cabinet after FM Jaitley’s assurance to state FM that the government will include in the Bill the mechanism of compensating states for all the loss of revenue for 5 years.
However, the Select Committee of the Rajya Sabha had recommended 100% compensation for the likely loss of revenue during that period.
Post the amendments, the Centre will now constitutionally guarantee states against any loss of revenue from the GST subsuming all indirect taxes, including VAT, in the first five years.
The Cabinet, headed by PM Modi, decided to include in the Constitutional Amendment bill that any dispute between states and the Centre will be adjudicated by the GST Council, which will have representation from both the Centre and states.
Among the amendments approved include the abolishment of 1 per cent additional tax levy which was demanded by the Opposition parties led by the Congress.
It also approved the compensation for states for five years instead of the earlier ‘up to’ five years as proposed in the draft GST bill.
The Cabinet also dropped a 1 per cent manufacturing tax.
The empowered council of state finance ministers in a meeting with the finance minister Arun Jaitley on Tuesday had agreed to not including the GST rate in the Constitution.
The amendments approved will now isolate the Congress which has been demanding the inclusion of the GST rate in the Constitution.
The other demands of including GST rate in the statute and a Supreme Court judge-headed dispute resolution body has not been accepted. It remains to be seen if meeting of its demands halfway will persuade the Congress to support the legislation.
With states on board and the Cabinet approving the amendments, the government hopes to get the long-pending Bill passed in the ongoing monsoon session of Parliament.
According to Nomura, the expected timeline for the passage of GST is by August 12 and there is a 60 per cent probability for this, a PTI report said.
“We believe a constitutional amendment that allows for a goods and services tax (GST) is more likely than not to be passed during the ongoing Monsoon Session of parliament (July 18-August 12),” Nomura was quoted by PTI.
The GST was supposed to be implemented from April 1, 2016 but strong opposition from Congress led to the delay.
There is, however, talk of mentioning the GST rate in one of the two supporting legislation that need to be passed after the Constitution is amended, a move that may pacify the Congress.
The Bill has already been passed by the lower house of Parliament and awaits the passage from the Upper House. It requires two-third vote to get passed from both the houses. Once the Upper House approves the legislation, the amended Bill will have to go back to the Lower House again for approval.
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