Reasonable rates are key to success of GST: Govt

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SME Times News Bureau | 31 Jul, 2015
As union cabinet approved changes to the GST Bill suggested by a Rajya Sabha committee, the government on Thursday said it is currently working on the rates to be implemented for the proposed reforms to India's indirect tax regime.

"Working closely on GST rates. Reasonable rates are key to its success," Revenue Secretary Shaktikanta Das tweeted.

"Passage of bill in parliament to take us to next activities," he said.

The cabinet on Wednesday gave its nod to some changes recommended by a parliamentary panel, notably an extra 1 percent levy to compensate the states for potential tax losses.

"Yes, the cabinet has approved some of the suggested amendments (by the parliamentary panel)," an official told agency after the meeting of the cabinet, presided over by Prime Minister Narendra Modi here.

The report of the committee, headed by BJP leader Bhupendra Yadav, was tabled in the Rajya Sabha on July 22.

"Administratively, we are taking all steps for both the Centre and states to meet the April 2016 deadline," Revenue Secretary Shaktikanta Das told reporters here after the panel presented its recommendations.

According to sources, some of the suggestions accepted on Wednesday by the cabinet include a definite commitment to compensate states for the losses on account of moving to a unified pan-India indirect tax regime for five years, compared with a vague expression "may compensate" in the original bill.

The far-reaching indirect tax reform seeks to create single Indian market by subsuming most indirect taxes levies of the central and state governments, such as excise duty, service tax and value-added tax that is seen as facilitating tax compliance, and curbing inflation through better supply chains.

But for Goods and Services Tax (GST) to get legal sanction is a lengthy process, given the Bharatiya Janata Party's strength in the upper house.

Being a constitution amendment bill, it needs passage in parliament with two third majority, following which at least 15 state legislatures have to ratify it, before being sent to the president for assent.

As of now, the Congress, the Left and the AIADMK have not made up their minds as yet.

The opposition is mainly opposed to the proposal for a 1 percent additional tax on goods travelling from one state to another, as it is felt it would not only push up prices, but also have a cascading effect.

Just ahead of the cabinet meeting, Congress leader M. Veerappa Moily, also the chair of the parliamentary panel on finance, expressed his reservations.

"Right from the beginning, we have been telling that there is no need for effecting such amendments through a series of ordinances. There is some deficiency in this government," Moily told reporters on the margins of a seminar organised by leading industry chamber Assocham.

"They first act, and then think. But they should first think, and then act. The land bill is one such example. Even GST is an example," he said.

"But there is a big process involved. This (the amendment) will be only a constitutional framework for GST. The Centre has to pass a GST Act. Each state will then have to pass a GST Act. It is a long way off."

The select committee report, which by a majority endorsed almost all the GST bill provisions, is however marked by dissent notes from the Congress, AIADMK and Left parties.

In case of the provision for levying 1 percent additional tax by states, the committee suggested the levy should only apply to "all forms of supply made for a consideration".

According to the bill, when goods move from one state to another, an additional one percent tax would be levied, but the opposition said it would lead to a cascading effect.

The committee however retained the representation of the Centre and states in the GST Council at one third and two third, despite demands to reduce the Centre's representation to one fourth.

The union government has set the target to reform India's indirect tax regime from April next year, and had earlier proposed 100 percent compensation to states for the first three years.