The second of leg of the Budget session of Parliament began today with Prime Minister Narendra Modi and Union Finance Minister Arun Jaitley expressing high hopes of the national goods and services tax (GST) bill getting nod of Parliament this time around.
The Modi government is keen on rolling out the GST from July 1 this year. Parliament requires to give its consent on a slew of bills before the GST become a reality.
WHAT HAS BEEN DONE TILL NOW
The constitutional amendment was made last year to enable formation of GST Council, comprising of the representatives from all the states, Union Territories and the Centre. The Union Finance Minister heads the Council.
The GST Council has approved two draft bills, which will be presented in Parliament for their passage. These bills are the Central GST (C-GST) and the Integrated GST (I-GST).
The GST Council will take up the remaining State GST (S-GST) and Union Territory-GST (UT-GST) during its next sitting on March 16.
WHY SO MANY DIFFERENT BILLS
The Constitution of India has given both the Centre and states the financial powers including those to levy taxes. The C-GST will be levied by the Centre on goods and services falling under its domain- currently levied under excise and services taxes.
The I-GST will be levied on the supply of goods and services from one state to another.
The S-GST will be levied by the states on the goods and services falling under their domain. The Bill for S-GST will have to be passed by each of the 29 state Assemblies.
The Bills for C-GST and I-GST will have to be passed by Parliament before they could be rolled out. The UT-GST will be passed by the Assemblies of Delhi and Puducherry. This will also go the Parliament for approval. As these bills are money bills, they can be sent for President’s consent even if the Rajya Sabha votes against it. With the BJP have comfortable majority in the Lok Sabha, the passage of GST should not be a problem, but the provisions of the bills leave many sticking points, politically.
STICKING POINTS FOR GST
When GST was introduced as a concept, it was said that it would be one-nation, one-tax regime. When the details came out, it proposed taxes ranging from five per cent to 28 per cent.
The effective GST rates have been kept at 5, 12, 18 and 28 per cent. The model GST draft bill has a clause enabling the governments to levy up to 40 per cent tax (20 per cent by the Centre and 20 per cent by the states).
The draft also provides for an additional levy of one per cent over and above the GST. Both the Centre and states can levy separately. The Congress has objected to the capping tax rate. The largest Opposition party in the Lok Sabha has maintained that the maximum tax rate should be fixed at 18 per cent and that the law should have a clear mention about it.
The Congress has also demanded that tobacco and petroleum products should also be included in the GST regime. The third sticking point for the Congress is its demand for an independent mechanism for resolution of disputes between the Centre and the states or among the states. The government has not agreed to these demands.