GST Bill in House, faces long haul

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New Delhi | Published: May 6, 2015 1:46:45 AM

Escapes being referred to standing panel again

GST Bill in Lok SabhaGST Bill row: The parliamentary parties of both the BJP and Congress would meet on Wednesday to take stock of the situation. (Reuters)

Parliament on Tuesday took up for consideration the much-touted Bill to bring about the Constitutional changes necessary for ushering in the epochal goods and services tax (GST) after the Lok Sabha chair decided, despite the Opposition’s insistence, not to send the Bill, modified from an earlier version pushed by the previous government, to the standing committee for a second time.

Finance minister Arun Jaitley made a fervent plea for an early consensus on GST, saying any further delay could prove costly for the economy, given the reform measure’s potential to produce up to 2 percentage points of incremental GDP expansion. He also said consuming states would have no reason to stall the Bill as they would only gain from GST adoption.

Although not sending the Bill to the standing committee amounted to crossing one hurdle in the way of meeting the latest April 2016 deadline for GST implementation, given the long legislative process that lies ahead and the ruling NDA’s lack of even a simple majority in the Rajya Sabha (a Constitutional Bill needs ratification by two-third of members present in both Houses besides approval by 50% of the state assemblies), uncertainty continued to prevail on when the proposed comprehensive indirect tax will take effect.

Official sources, however, exuded confidence, saying that since the Constitution (122nd amendment) Bill for GST is a “money Bill”, if the Upper House returned it to the Lok Sabha without passing, the latter could send it back for a second time when the former is obliged to pass it.

Deputy speaker M Thambidurai, who was in the chair, obliged Jaitley saying that speaker Sumitra Mahajan had earlier accepted Jaitley’s plea against referring the Bill to the standing committee that had deliberated it on for a long two and a half years. Leaders from Congress, BJD, AIADMK and CPI(M) protested, saying the Modi government was bypassing the House panels.


Congress leader and chairman of the parliamentary standing committee M Veerappa Moily argued that the revised Bill contained several changes from the version the House panel had examined earlier and, therefore, was a fit case to be referred to the committee. “I support GST, but not your Bill,” he said.

The parliamentary parties of both the BJP and Congress would meet on Wednesday to take stock of the situation.

Parliamentary affairs minister Venkaiah Naidu has urged leaders of allies to ensure their MPs are present in full numbers in the Lok Sabha to ensure the Bill’s passage on Wednesday.

The main changes in the new Bill from the 2011 version proposed by the UPA government are: A provision for exporting states to levy an extra 1% tax on interstate supply of goods over and above the interstate GST rate, which could have a cascading effect (experts say this would partly negate the GST’s ability to limit the tax only to the value added); dropping the provision for a dispute settlement authority, a five-year compensation with Constitutional guarantee to states for any loss from GST adoption; and exclusion of alcohol from the purview of GST. The 2011 Bill excluded petroleum as well but the current one hasn’t, leaving the option for inclusion of these high-revenue items at a later date.

Moily and other opposition leaders who spoke in Parliament on Tuesday cited some of these changes and the change in the relative roles of the Centre and states in the GST Council’s decision-making process to press their case for sending the Bill to the standing committee again. The power proposed to be given to the GST Council to recommend to the Finance Commission how to apportion I-GST proceeds was also contested by the Opposition. Some MPs also questioned the Constitutional Bill delving into some details, while these could have been left for the model GST laws at the Centre and states to tackle.

As per the 2011 Bill, the quorum of the GST Council would be made up by one-third of the members whereas the latest Bill makes it 50% of the members. Also, the UPA government’s Bill had proposed that all decisions by the council shall be by consensus, while the current Bill says decisions will be made by three-fourths weighted votes. The Centre’s vote will carry the weight of one-third of the total votes cast and votes of all states together would have a weight of two-thirds. In this arrangement, decision-making will be possible only when both parties come together.

Moily alleged that the Centre’s votes carries more weight than that of individual states. He also said that in a federal system, where ministers from individual states may take the position of their political parties, such a voting system will cause confusion.

The Congress was also not in favour of the current Bill dropping the earlier provision for a dispute settlement authority, which Moily said comes in the way of objective and non-partisan dispute resolution. The 2011 Bill had proposed that a three-member authority led by a former Supreme Court judge or a sitting high court judge could resolve Centre-state disputes. The Bill introduced by Jaitley dropped this provision as such an authority cannot override the supremacy of state legislatures. “There is a strong case for discussing this substantive change in the parliamentary committee. Otherwise, some of the states may be marginalised tomorrow. There may be orphan states without any voice at all,” Moily said.

There was also political opposition on dropping the idea of a list of declared goods of special importance chosen by Parliament on which states are restricted from levying taxes. The Bill dropped this too under pressure from states, as it gave higher rights to the Centre.

“The Bill has spent two and a half years before the standing committee and has gone through dozens of meetings of the empowered committee of state finance ministers under four different chairpersons. Delaying the Bill will not serve any purpose. Delaying by one more year means your states are going to lose the benefits,” said Jaitley.

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