India took a big leap forward in rolling out the GST, seen as the biggest tax reform since Independence, with the Lower House of Parliament giving its nod to four supplementary Bills.
Their passage will allow the government to prepare for the July 1 launch of the single levy that will replace multiple central and state taxes and make the country a seamless national market, boosting India's growth rate.
The Lok Sabha passed the Bills late on Wednesday evening after several hours of debate.
The detailed rules for the single tax and rates of individual goods are to be decided next by the GST Council and the states will take up the state GST Bills in their respective assemblies. The government is simultaneously planning a massive outreach to increase awareness and get stakeholders trained and ready for the tax that, according to some estimates, will lift the country's GDP by up to 2%.
The 4 Bills have been introduced as Money Bills, which will ensure a smooth passage through the Rajya Sabha where the ruling coalition does not have the numbers. The Upper House of Parliament has limited powers in respect of Money Bills.
The GST Council, the apex body comprising the Centre and the states set up to decide on GST issues, has finalised a four-tier tax structure of 5%, 12%, 18% and 28%, but the highest slab has been pegged in the law at 40%.
Besides, a cess would be levied on demerit and luxury goods on top of the peak rate to create a fund, the proceeds of which will be utilised to compensate states for revenue losses on account of GST. If the tax rate had been raised to build up the compensation fund instead of the cess, the tax burden would have become very high, Jaitley said.
Jaitley defended the anti-profiteering law, saying any rebates should be passed on to consumers. He said GST on real estate and petroleum goods could be levied once states endorse such a proposal and these would be taken up for discussion later.
The technology backbone is approaching readiness with most state governments leading the registration campaign for bringing industry onto the GST tax portal. The GST Council will meet on March 31 to clear the rules and procedures and subsequently begin work on fitting goods and services in the tax slabs.
Much needs to be done between now and July 1. The law provides for a composition scheme for turnover below Rs.50 lakh under which manufacturers will be charged 1% CGST and 1% SGST, restaurants 2.5% CGST and 2.5% SGST and other supplies 0.5% CGST and 0.5% SGST. This has been brought in to reduce the compliance burden for small and medium enterprises.
It has provisions for the levy of GST on specified petroleum products (petroleum crude, petrol, high-speed diesel, aviation turbine fuel and natural gas) from a date to be notified by the government on the council's recommendation. The I-GST Bill provides for the levy of tax on all inter-state supplies of goods and services except supply of alcohol for beverages at a rate to be notified not exceeding 40%. The tax collected will be apportioned equally between the Centre and the states. It will not apply to Jammu and Kashmir. The GST Council, chaired by Jaitley, approved the four legislations over a series of 12 meetings.