GST bill may sail through, but the rate has to be fixed: Chidambaram

03 August 2016

The long-delayed Constitution Amendment Bill that will herald a common goods and services tax (GST) for the entire country seemed to get through the Rajya Sabha hurdle with the Congress and the BJP striking a conciliatory note.

Finance minister Arun Jaitley had earlier hinted about the thaw over the GST bill when he told a television channel, hours before introducing the bill in the Rajya Sabha, that the Congress was never principally against the GST. He also acknowledged that the GST bill was originally a Congress baby, while introducing the bill.

Former finance minister P Chidambaram, who initiated the discussion from Congress benches, also thanked Jaitley for the friendly tone set by the ruling party "in the last two weeks" and said his party hoped that the Constitution (122nd) Amendment Bill will be passed by the House after the debate.

But, while on the face of it, conciliation seemed to be the mood of the House, Chidambaram did indicate that, even if the bill is passed by the Rajya Sabha, the GST debate will just get postponed, not settled.

Chidambaram insisted on the Congress demand on capping the GST rate at 18 per cent. Congress also wanted this rate be mentioned in the Constitution Amendment Bill so that no government could increase it by a mere executive order.

The bill introduced by Jaitley on Wednesday does not mention the GST rate so to that extent the Congress has yielded. But, Chidambaram pointed out, that does not mean the Congress has given up the demand either for capping the GST rate at 18 per cent or for enshrining it in the law. This will come up again, Chidambaram said, when "three months later you will have to come back to the House to pass the Integrated GST Bill".

The GST Constitutional Amendment Bill introduced in the Rajya Sabha today proposes the concept of an all-encompassing pan-India indirect tax. This amendment will pave the way for the Integrated GST law that will have to be passed by Parliament setting out the details of the GST regime, rates and how the revenue will be shared between the Centre and the states.

Chidambaram insisted that the government will have to inscribe the GST rate into the law because "no tax bill will stand legal scrutiny if it does not mention the rate of taxation".

Chidambaram defended his party's stand on pegging the GST rate at 18 per cent, saying that it is derived from the report of the government's chief economic advisor.

If left undefined, Chidambaram said, a future government may hike the GST rate to 23 or 24 per cent.

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