The Lok Sabha on Wednesday passed the much-awaited Central Goods and Services Tax (GST) Bill, Integrated GST Bill, Compensation GST Bill and Union Territory GST Bill 2017, after negating all the amendments put forward by the Opposition. All the four bills that were moved by Finance Minister Arun Jaitley in the lower house was passed by voice vote. The historic GST regime is now closer to meet its July 1 target of rollout.
Talking to media after the house was adjourned, Jaitlsey said a significant step forward has been taken and he sees history in making. “With Lok Sabha having approved all 4 laws that Centre is supposed to legislate through Parl, I think significant step forward has been taken. We are virtually seeing history in the making because we are now going to be transforming into a new system of indirect taxation,” said Jaitley.
Earlier, replying to the seven-hour-long debate, Jiatley said goods may become “slightly cheaper” after implementation of the Goods and Service Tax. He said all other taxes like entry tax in states will be removed once the GST is in place. “Once all other taxes are removed, goods will become slightly cheaper,” he said.
Noting that both the central and state governments are pooling their sovereignty to have this tax regime, he noted that India, despite being one political entity, remained different economic entities with states having different taxes. “India remained different economic entity. Trucks could be seen waiting outside state border, there was no free flow of goods,” the minister said. He also clarified that commodities like food items will have zero tax.
He said the GST Council, comprising Finance Ministers of Union and states, had agreed to take a decision on bringing real estate within the ambit of the new tax regime within a year of its rollout.
On the impact of GST on prices, Jaitley said: “Today you have tax on tax, you have cascading effect. When all of that is removed, goods will become slightly cheaper”.
On why the Council has decided on multiple GST rates, Jaitley said one rate would be “highly regressive” as “hawai chappal and BMW cannot be taxed at the same rate”. He said currently food articles are not taxed and those will continue to be zero rated under the GST. All other commodities would be fitted into the nearest tax bracket.
The GST Council has recommended a four-tier tax structure — 5, 12, 18 and 28 per cent. On top of the highest slab, a cess will be imposed on luxury and demerit goods to compensate the states for revenue loss in the first five years of GST implementation.
However, the Central GST (CGST) law has pegged the peak rate at 20 per cent and a similar rate has been prescribed in the State GST (SGST) law, which takes the peak rate to 40 per cent which will come into force only in financial exigencies. Jaitley said the cess would be transient for a period of 5 years so that the proceeds can be utilised to compensate the states.
Touted as the biggest taxation reform since Independence, GST will subsume central excise, service tax, VAT and other local levies to create an uniform market. GST is expected to boost GDP growth by about 2 per cent and check tax evasion.
Source:The Indian Express