The government on Tuesday introduced the much-talked-about Constitution Amendment Bill needed to facilitate implementation of the goods and services tax (GST) in the Lok Sabha. The GST will subsume all indirect taxes such as excise duty and service tax at the centre level and value added tax (VAT) at the state level as well as local taxes, paving the way for creating a common market for goods and services across the country.
The constitutional amendment is crucial as it seeks to confer simultaneous powers on Centre and states to levy taxes on goods and services as at present the Centre cannot impose excise duty beyond the manufacturing stage and the states cannot levy tax on services.
The Bill will now go through Parliamentary scrutiny and will be sent to the Standing Committee before being put up for debate and final passage. Being a Constitutional Amendment Bill, it will require two-third support in both the houses of Parliament and approval of not less than half the states.
The Bill stipulates that an all-powerful GST council will be created that will act as a joint forum for the Centre and states. The council will be headed by the finance minister and will have finance ministers of each state as its members. The council shall make recommendations on taxes, cesses and surcharges levied by the Centre, states and local bodies. The Bill has proposed a dual GST structure ? one for the Centre and one for states ? but has steered clear of making commitment on rates.
The GST has been pending for the last four years due to differences between the Centre and some states. The bone of contention preventing consensus on the Bill is the issue of fiscal autonomy of the states. The BJP-run states have rejected three drafts in the passed on grounds that the council will give all the powers to the centre.
In view of the strong opposition, the Finance Ministry is trying to work out a solution by proposing to introduce hybrid of the second and third draft of the constitutional amendment bill on GST in the current budget session.
The major point of difference seems to be setting up of the GST Council through an Act of Parliament, instead of Presidential order as opposed to the previous draft. Additionally the composition of GST Dispute Resolution Authority, earlier proposed as a part of the Bill, will be decided by the Parliament. Furthermore, petroleum, natural gas, diesel and ATF have been kept out of the GST ambit in the final draft.
In spite of the opposition from the States, central government has been keen to bring in much awaited reform in indirect taxes by implementing GST though it has already missed two deadlines. Revenue secretary Sunil Mitra has said it may be difficult to implement GST from April 2012 and the date could be pushed to June. In the recent past various steps have been take towards the roll out of GST such as introduction of discussion paper on GST, alignment of excise duty rates with service tax rates, establishment of IT infrastructure, etc.
