LS passes GST bills, clears path for 1 July rollout of new tax regime

The Lok Sabha on Wednesday passed four enabling pieces of legislation to clear the path for introducing the Goods and Services Tax (GST) that would herald a unified national market and boost economic growth by about 0.5 percentage points.

The lower house of Parliament cleared the four goods and services tax (GST) bills after a marathon seven-hour debate over the multiplicity of rates, ambit of the new tax system, nature of legislation, proposed anti-profiteering body and Parliament's right over the new tax system.

The Lok Sabha passed the four bills - Central GST, Integrated GST, Compensation to States, Union Territory GST - despite the opposition moving several amendments.

Opposition parties like the Congress, Trinamool Congress and BJD contested several clauses in the bills such as the power of the GST Council to decide on laws that the states or the centre would enact and the need for a uniform rate for all commodities instead of multiple rate slabs.

Finance minister Arun Jaitley, however, defended the GST Council decision to have four GST slabs and a cess over the peak rate, while Congress member Veerappa Moily said one-nation, one-tax under GST is a myth and there are virtually seven rates, including exemption, and cess.

The GST Council has approved four tax slabs – 5 per cent, 12 per cent, 18 per cent and 28 per cent, besides a cess over the peak rate on 'sin' and 'luxury' goods.

Jaitley said in diverse categories of goods consumed by the poor and affluent classes, one can't have a uniform GST rate. ''The Congress had earlier argued for one rate with a cap of 18 per cent. We, at that time, had also said this is not possible,'' he said.

The finance minister, however, said there will be a single rate for one commodity, pan-India.

Moily also lambasted the move to categorise GST legislation as money bills as a deliberate attempt to undermine the Rajya Sabha. ''Rajya Sabha has been deliberately avoided... It is perhaps the biggest theft in federal finances.''
The finance minister, however, dared any member of the House to cite even a single instance since adoption of the Constitution where a bill relating to taxation and its administration has not been categorised as a money bill.

To query by opposition members on the need for a separate anti-profiteering provision in the Competition Act in addition to the Competition Commission, Jaitley said the institution under the Competition Commission of India is for an entirely different purpose - to prevent cartelisation, abuse of dominance, etc. The anti-profiteering body in the GST will see that duty reductions do not lead to unjust profiteering, he said.

On the status of the real estate sector, Jaitley clarified that the Council, which is going to be a permanent body, had taken a decision that the aspect of bringing it under this indirect tax regime would be reviewed in the first year of GST.

On the issue of petroleum products, he said that the Constitution provides that these items would attract GST, though the rate has been kept at zero. Going forward, it would require only an executive decision on setting a rate on petroleum products, he said.

As regards concerns raised by banks and insurance companies over the need for multiple registrations under GST, Jaitley said that a clause has been provided that can provide an exemption in exceptional circumstances and the GST Council will take a call on it.

The bills, which bring the 'one-nation, one-tax' regime closer to reality, will now be taken up in the Rajya Sabha.

The GST Council will now take up subordinate legislation that would be tax specific, including rates and classification of goods and services.

The GST Council will be meeting tomorrow (31 March) to decide on the specifics of tax rates, which will be recommended by a committee of officers next month for the new indirect tax system to be rolled out from 1 July.

Finance minister Arun Jaitley, who steered the passage of the bills, told the House that the GST will make commodities ''slightly cheaper'' and rates would depend on whether the commodity is used by a rich person or a common man.

Hailing the historic move, Prime Minister Narendra Modi, who was present in Lok Sabha, tweeted in Hindi: ''Congratulations to all the countrymen over passage of the GST Bills. New Year, New Law, New Bharat.''

States will now have to pass their State GST Bills, which would be more or less the replica of the Central GST and Union Territory GST Bills.