Lok Sabha passes GST Bills after marathon debate
Dated 30th March, 2017
Historic step towards a new indirect tax regime.
In a historic step towards implementing a new, consolidated indirect tax regime from the proposed date of July 1, the Lok Sabha on Wednesday passed four Bills, relating to the implementation of the Goods and Services Tax (GST), following a marathon nine-hour debate.
“Congratulations to all the countrymen over passage of the GST Bill. New Year, New Law, New Bharat,” Prime Minister Narendra Modi said in a tweet in Hindi soon after the Bills were passed.
Assemblies to act
The Lower House passed the Central GST Bill, the Integrated GST Bill, the GST Compensation Bill, and the Union Territory GST Bills. The fifth legislation, the State GST Bill, will need to be passed by the Assemblies of each of the States and the Union Territories with legislature.
The passage of the Bills followed a day-long debate, in which Opposition leaders raised several objections, such as the disempowerment of Parliament in setting tax rates, the reduction in the fiscal autonomy of the States, the need for several tax rates when the principle is to be of ‘one nation, one tax,’ and the levy of additional cess.
“The States and the Centre have pooled their sovereignty in the Council,” Union Finance Minister Arun Jaitley said in reply to the objections.
“The recommendation of the rates will come from the Council. But the Council has two-thirds voting by the States and one-third by the Centre. The GST Council has been given the power to only make a recommendation regarding the model law.
“The Constitutional amendment gave that power in Article 279A. The plenary power to frame legislation can only be with Parliament or the state legislative assemblies as the case may be,” Mr. Jaitley said.
However, the Finance Minister added, the states and the Centre mist be guided by the federal nature of the agreement between the Centre and the states.
“The consequences of not acting on the GST Council’s recommendations is if everybody decided to set a different rate, then the implementation of GST become practically very difficult if not impossible,” Mr Jaitley said.
Regarding the need for multiple rates, the Finance Minister explained that if there was only a single rate, then the GST regime would be a highly regressive one as luxury goods would then be taxed at the same rate as necessities.
“If somebody uses a BMW car, then that cannot be taxed at the same rate as Hawaii chappals or baby food,” Mr Jaitley said. “A single rate is not possible. The easiest formula for this was that the GST rate for a good or service will be the closest slab to the current rate of tax.”
Earlier in the day, opposition leader Veerappa Moily raised the objection that the GST Bills were being passed as money bills and hence were eliminating the Rajya Sabha from the decision making process.