The government tabled a constitution amendment bill amid Opposition uproar in the Lok Sabha on Friday, aiming to clear the way for implementation of the Goods and Services Tax (GST) that the finance minister said can raise India's GDP by up to 2%.
The Centre proposed to roll out the indirect tax regime on April 1 next year to replace the complex system of nearly 20 different taxes and levies imposed on commodities by different states, as part of Prime Minister Narendra Modi's promise to streamline government and support businesses.
Finance minister Arun Jaitley said the GST will simplify and harmonise the indirect tax structure, reduce cost of production and inflation in the economy and ensure India becomes a common seamless market.
"GST is going to lead to a win-win situation as far as the Centre and the states are concerned. It is going to up India's GDP. It is going to up India's revenue and, therefore, I commend GST Constitution Amendment Bill to the House for (consideration)," he said in the Lok Sabha.
However, the Congress led an Opposition walkout with parties demanding the bill be examined by a standing committee of Parliament as it was quite different from a UPA legislation brought in 2011.
"The government is trying to bulldoze Parliament. We will oppose the GST bill with all the might that we have," Congress MP Deepender Singh Hooda said.
Analysts say the tussle also has its roots in the issue of division of taxation powers between the Centre and states in a federal system, because while the states would get to keep a sizable share of revenues from the GST, they would lose the authority to levy a wide array of lucrative state-specific taxes.
Seeking to assuage these fears, Jaitley said the Centre and the states will have concurrent power to levy tax on goods and services.
"Nobody has the monopoly to stop the growth of the country. The UPA must support the legislation you created," he said, hitting back at the Opposition.
The bill amends the Constitution and so requires a two-thirds majority in both Houses to vote for it, while it already has the consent of many states who are key stakeholders.
The legislation will be debated next week as opposition members sought more time to move any amendments.
When implemented, the GST is expected to eliminate several logistical logjams and vastly increase the speed of freight, as a World Bank study showed Indian truckers lose millions of operating hours a year stuck at interstate checkpoints, creating more opportunities for harassment and bribe-taking.
(With agency inputs)