GST update

Senior BJP leader Yashwant Sinha-headed Parliamentary Standing Committee on finance is soon likely to submit its report on the constitutional amendment proposed by the government to facilitate the goods and services tax (GST), brightening the prospects for the comprehensive reform of country’s indirect taxes structure. The GST seeks to replace with a single levy indirect taxes such as central excise duty, services tax, and state taxes including value-added tax, entry tax and purchase tax. The government has tabled in the parliament constitutional changes necessary to roll out the tax despite many states still not backing this ambitious reform of the indirect tax regime that has been delayed by more than two years. The regime was to be rolled out from April 1, 2010. 
“We are targetting Monsoon Session (beginning July). I don't want the committee to take the blame that we are standing in the way of progressive legislation reforms,” Sinha told reporters after the first meeting of the panel on the legislation. “We can be working harder than we do. We will try to submit our report by 
Monsoon Session of the Parliament,” he said. The government is expected to push this key reform in the current financial year as the IT backbone for the new tax is expected to be functional by October. A number of experts see the GST regime as a game changer for the industry that can give a 2-2.5% boost to the country’s GDP through reduction in costs of doing business and lower tax on inputs. The constitutional amendment bill tabled March last year will allow the centre to tax goods at the retail level and states to tax services. 
Under the current law, centre does not have the powers to tax retail sale of goods while states cannot impose a levy on services. 
The bill will have to be passed by the Parliament, and also at least 50% of state assemblies and legislatures, making it difficult for the centre to press ahead with this reform without adequate consensus. After the ratification of this amendment, the centre and states will also have to clear the GST legislation. Most of the BJP-ruled states and Tamil Nadu say the bill encroaches upon their autonomy, refusing to drop their opposition even after the centre has modified the contentious provisions at least four times. 

Tamil Nadu Chief Minister Jayalalithaa had even written to Prime Minister Manmohan Singh that the constitution amendment bill to facilitate GST encroached on state powers and was like entering an “unknown territory” fraught with risk and uncertainty. 
The centre has proposed a mechanism to settle dispute that may arise due to any deviation from the recommendations of the GST council – a body of states and centre that will decide on the GST issues. Both BJP and the Left parties have opposed the mechanism. The panel had called former chairman of empowered committee of state finance ministers Asim Dasgupta for a presentation and will meet the panel's current head Bihar deputy chief minister next week. 

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