Cabinet to take up GST Bill today

Business Standard, March 15, 2011

Unfazed by the opposition from various states, including BJP-ruled ones, the Union Cabinet is set to take up a Constitution Amendment Bill tomorrow to roll out the Goods and Services Tax (GST), which has already missed a deadline and is set to miss new ones as well.

Officials said the Cabinet will take up the Bill as the government is keen to table the Bill in this session of Parliament.

A Constitution Amendment Bill is necessary since according to the current arrangement, the Centre cannot impose a tax beyond manufacturing and states cannot levy service tax. Under the GST, the Centre and states will impose the tax on common goods and services. Hence, state-level VAT, and the Centre?s excise duty and service tax will be done away, once GST is implemented. The new indirect tax will also subsume cess, surcharges and other local levies.

For the Bill to be passed, a two-thirds majority in Parliament is needed, as is the approval of at least half the states. With BJP-ruled and a few other states still opposing the Bill, despite the four drafts prepared by the Centre, it will take much convincing from senior Congress leaders like finance minister Pranab Mukherjee to convince the opposition.

To assuage the states? opposition, the Centre had prepared a fourth draft of the Bill, dropping some key proposals. The third draft had proposed the setting up a GST Council by an Act of Parliament, instead of a Presidential order, as proposed in the second draft. The fourth draft has now proposed setting up a GST Council by Presidential order. It will describe the composition and the role of the Council, to be headed by the Union finance minister.

?The Bill is a combination of the second and third drafts. The proposals under Article 279A and 279B in the second draft have been restored, as most states felt the second draft was better. The proposals under the third draft about powers to Union Territories have been retained,? said a finance ministry official.

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