Prime Minister Narendra Modi has said the passage of the enabling legislation for GST has marked a major step towards “freeing India from tax terrorism“ and in helping curb black money and corruption and in making “the consumer, the king.“
Intervening in the Lok Sabha debate, minutes ahead of the amendments to the GST enabling Constitution amendment bill was passed, Modi attributed the passage of the legislation not to a single party or a government but to the collective ethos of India's democratic process.
Recalling that August 8 was the anniversary of the Quit India Movement that Mahatma Gandhi launched, Modi said, “this anniversary of August Kranti marks a crucial step towards making India free of tax terrorism. Modi then came out with his own characteristic definition to GST. “GST means Great Step by Team India, it means Great Step Towards Transformation, it means Great Steps Towards Transparency, which is why we are bringing in GST,“ he said.
He then subtly tried to put his government's stamp on GST.
“Ek Bharat, Shreshth Bharat (United India and Great India) this is the dream of all of us. When we look at railways, post offices, all India civil services...we get the feel of one India. Now Digital India, Sagarmala...all these also make us aware of one India, they strengthen that spirit. GST is the new pearl that we are adding to this necklace, this strengthens the spirit of one India,“ he said.
Modi also rose above partisan and competitive politics to distribute credit for the legislation that saw bitter and crafty political battles over the last six years. “GST can't be seen as a victory of only one party or a government. It is the victory for democratic ethos of India and a victory for everyone...All government, both the Centre and the state governments, all political parties, members of Parliament all have contributed to make this historic day happen through united political and social thinking,“ Modi said during his 40-minute speech.
In an indirect response to Congress reminding Modi that as Gujarat chief minister he had opposed the every legislation, the prime minister said: “Having been a chief minister, it has become easier for me to address issues and concerns state chief ministers have been raising on GST.“
In a deft spin to Congress' Mallikarjun Kharge's reminder that it was Congress that “gave birth“ to the GST idea, Modi said, “it happens someone gives birth and someone does the grooming. We know who gave birth to Lord Krishna and who brought him up.“ Trying to dispel the fears of GST triggering inflation, PM said his government has ensured the items the poor people consume as well as food and medicines are kept out of GST.
Projecting GST as an incentive for cleaning the system, Modi said, “we all know how the system of kacha bill and pakka bills (fake and real bills) operate. But GST will bring an end to the fake bills as traders will provide the real bills and accounts so that they benefit (in getting the input tax credit). He said the real-time data available courtesy GST will also help small traders and businessmen to produce evidence of their business volume in order get easy access to bank loans.
Parliament has passed the constitution amendment Bill to roll out Goods & Services Tax, shifting this historical reform to states that need to pass it quickly for the Centre to take the next steps.The Lok Sabha on Monday passed the changes to the Constitution (22nd Amendment) Bill, 2014, cleared by Rajya Sabha on Wednesday last week. In all 443 members voted in favour of the Bill and none against. The Lok Sabha had passed the Bill last year in May , but that underwent some amendments in the upper house.
The government wants to implement this tax, which will replace as many as 17 indirect taxes levied by states and the Centre, from April 1, 2017. It needs to get two more laws to be passed by Parliament in the winter session.
At least 16 out of 31 provinces with Assemblies (29 states and two of the seven union territories), or more than half the total, need to pass this Bill before it can be sent for President's assent. The government is in touch with several state governments to get the Bill passed that will create a national market for delivery of goods and services currently fragmented along state boundaries.
The new tax system is expected to make manufacturing more competitive and speed up logistics among host of other benefits. Some estimates say it will add up to 2% to the country's GDP.
“This is indeed the biggest reform in the field of taxes in the country ,“ industry body CII said, calling for its implementation by April 1next year.
Finance Minister Arun Jaitley said the GST rate will be decided by the GST Council, a body of states and the Centre that will be set up after the constitutional amendment is approved by the required number of states and signed by the President.
“This (rate) is a subject of calculation and not political sloganeering,“ Jaitley said in his reply to the debate on GST, rebuffing demand for a cap of 18% on the rates. A committee headed by Chief Economic Adviser Arvind Subramanian has suggested a standard GST rate of 18%, while assuming the low end of the rate at 12% and the upper end at 40% on sin goods that are seen as harmful to the society .
“Why would elected finance ministers of 29 states or representatives of Centre want to put unnecessary burden on consumers,“ the finance minister said, questioning the charge that the rate will be set too high and will hit consumers.
Everyone will want that lowest rate which will allow their government to function properly, he said, reiterating the guiding principles laid down by an empowered committee of state finance ministers that rates should fall under GST.
Several states have said the 18% rate is too low. Jaitley said the calculation is based on 2013-14 and ignores the cesses levied after that and it also needs to factor in the compensation the Centre has to pay to states.
“All (state) finance ministers said we have a slightly different perception (from CEA). Now that gap of 2-3-4% between them has to be converged,“ Jaitley said, adding that the Bill moved by the previous UPA government also did not have the concept of a rate cap.
Jaitley rejected the demand that the GST Bill, which will have the details of the tax, not be brought as a money Bill but as a finance Bill. The Rajya Sabha, where the ruling NDA is in minority, doesn't have much say on a money Bill. There was a similar demand in the Rajya Sabha as well.
“Whatever final draft the GST council prepares, depending on the language of that draft, it will be the authority of the speaker to decide (if it is money Bill or finance Bill),“ the minister said, adding that he has no discretion on the matter.
The finance minister said the concept that the GST Council will have two-third vote for the States and one-third for the Centre had been accepted by the UPA government after a standing committee proposed this formula.
In November 2013, the UPA accepted a proposal that any decision needed to be made a 75% vote.
Jaitley criticised the idea that a judicial tribunal should resolve disputes. “In the case of dispute between two states or between the Centre and states ... how are taxation disputes to be resolved. These are political decisions,“ the minister said. “The entire standing committee felt these are political disputes ... should be resolved through some political mechanism,“ he said.
“The other feeling behind this was that the imbalance that has come in our arrangement of power of separation that there is excessive judicial intervention in executive function. Will you give taxation power also to judiciary,“ he asked.
“(The GST) Council should decide what kind of dispute settle mechanism should be there; don't handover this power also to courts -this was the feeling (in standing committee),“ he said.