If all goes according to plan, the Rajya Sabha, is likely to give its stamp of approval to the Constitutional Amendment Bill in the ongoing session of Parliament, enabling the rollout of the Goods and Services Tax (GST).
The GST Bill has been stuck in the Upper House due to Opposition resistance since nearly a year now.
However, there’s some hope, this time.
The Cabinet last week took a big step forward by approving amendments to the Constitutional Amendment Bill, needed to make the GST a reality, incorporating suggestions by states. The Centre and states agreed on the broad principles to fix the tax rate, setting the stage for the Bill’s passage in the Rajya Sabha this week.
First, the regional parties broke opposition ranks, and now the Congress — though it continues to keep everyone guessing — seems to be reluctantly coming around.
As the Constitutional Amendment Bill, passed in the Lok Sabha in May 2015, is to be presented before the Rajya Sabha on Tuesday, here are the five main demands from states, and the Centre’s responses so far.
Drop 1% manufacturing tax: The Cabinet last week approved dropping 1% manufacturing tax. The 1% levy was to help the manufacturing states to ensure that the implementation of the GST does not lead to revenue loss. But in their last meeting, most states wanted this 1additional levy dropped.
Compensation guarantee: The states demanded absolute clarity as far as compensation is concerned and the central government has obliged. The Cabinet last week made changes in the Bill to provide a guarantee to compensate states for any revenue loss in the first five years after the GST is rolled out.
GST rate: Congress has reluctantly moved away from the demand of a constitutional provision to cap the GST rate at 18%. But, states wants that the principle of the GST rate to be arrived at by keeping in mind the impact on the common man. The rate should also protect the revenue generating capacity of the states, and not result in their revenue loss. The Centre has promised to include this in the GST Bill.
Dual control: Centre will not have control to tax businesses with a turnover below Rs 1.5 crore, states had demanded. To support the Constitutional Amendment Bill, states needed assurance on the issue of dual control. The central government has assured that this provision will be part of the GST Bill.
Dispute resolution mechanism: At a recent meeting between finance minister Arun Jaitley and the state finance ministers, there was a suggestion to have a retired High Court judge to head the proposed dispute resolution mechanism. This is work-in-progress, but the Centre has promised help to build consensus on this among states. This provision will be a part of the GST Bill, thus will not be a roadblock for the Constitutional Amendment Bill to be tabled on Tuesday.
Lack of political consensus has kept the landmark Constitution amendment bill stuck in the Rajya Sabha where the ruling National Democratic Alliance (NDA) is in a minority.
Both Houses of Parliament and at least half of the state assemblies will have to ratify it before it finally becomes a law.
It has missed several rollout deadlines, including the last one of April 1, 2016.