GST bill introduced in the Rajya Sabha

The Goods and Services Tax Constitutional amendment bill has been introduced in the Rajya Sabha today that is 3rd of August, 2016. The voting on the bill will take place in the night around 8 PM and would be preceded by a 5-6 hour discussion on the bill. The introductory speech by the Finance Minister Arun Jaitley is already out in the press. He has categorically thanked the opposition party for working with him to arrive at an acceptable outline for the GST bill. He also acknowledged that the Congress party was never opposed to the idea of GST.

The Congress party through its spokesperson Mr Chidambaram thanked the ruling party for accepting its demands. The three major agreements were as follows:

  • The scrapping of the 1% additional tax on goods being sold in states other than the manufacturing state. Since GST is a destination based tax, the additional levy was mooted to compensate for the revenue loss for the manufacturing state.
  • 100% compensation to all the states for the next five years for the loss of revenue arising out of the GST implementation.
  • Setting up of an independent agency involving members of the jury to handle the inter-state disputes related to the tax reform.

Besides this, another controversial demand was the capping of the GST rate at 18%. The Congress party finally agreed that the rate of GST should not be laid down in the constitution as a part of the amendment. Instead, the ceiling on the tax rate would be a part of the accompanying legislation that would be cleared separately by the centre and the state legislatures.

With the major hurdles out of the way and the two parties acknowledging each other for the agreements on the bill, it looks that the passage of the bill tonight will be a formality only. The Congress party alone has 60 seats of the total 243 members. The BJP alliance and Congress with its allies will ensure that the bill is passed with the two-thirds majority. The BJP had also had most of the regional state parties also on its side. They too have members in the Rajya Sabha who will favour the bill. It is only the AIDMK which is still undecided and may walk out of the Parliament if it still remains against the GST.

The game will, however, not stop here. Since there are major changes in the bill after it has been introduced today in Rajya Sabha it has to be ratified in the Lok Sabha once again. It will be passed in the Lok Sabha again as the ruling party has the majority there, but the procedure will take some time. Then the bill goes to the state legislatures and 50% of the 29 states must pass it. BJP alone has governments in more than 15 states and it will also go in favour of the bill. The bill will be back in the Parliament after almost 4-5 months in the winter session of Parliament.

At the final stage, it will carry the concrete details of implementation and have information on how it will affect the various sectors. At this juncture, it will be a bill that has been cleared by the Parliament and will be signed by the President of India. Then begins the implementation stage, that may see us through this financial year. The GST may be a reality in April 2017.

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