GST bill is approved in Union Cabinet

Dated 17th December, 2014

The Union cabinet today approved the constitution amendment bill on goods and services tax (GST), clearing the way for its introduction in the ongoing session of Parliament, which ends on December 23.

The government aims to roll out GST from April 1, 2016, to bring about the long pending indirect tax reform.

Though official details of the bill were not available, sources said it gave compensation to states.

It will also include petroleum products though initially the rate of taxation will be zero. Entry tax, too, will be part of the amendment bill, a source said.

States, which earn over 50 per cent of their revenues from taxes on petrol and other fuel products, wanted it to be out of GST so they could continue levying different tax rates on these products.

Alcohol will, however, be exempt from GST and states would have the freedom to decide their own levy, sources added.

The revised GST bill was brought before the cabinet after the Centre and states earlier this week reached a consensus on contentious issues, including those related to the taxation of petroleum products, which were holding up the proposed nation-wide tax regime for about seven years.

GST will subsume most of the indirect taxes such as excise duty and service tax at the central level and VAT and local levies on the states front.

The GST bill was last introduced in the Lok Sabha in 2011 by the then UPA government but lapsed, requiring the new NDA government to come up with a new bill.

GST proposes to facilitate a common market across the country, leading to economies of scale and reducing inflation through an efficient supply chain.

Full implementation of GST could lift India's gross domestic product (GDP) growth by 0.9-1.7 percentage points, according to a study by the National Council of Applied Economic Research (NCAER).

Once the amendments are passed by both the houses of Parliament with a two-thirds majority, all state legislatures will have to ratify them.

After that the actual GST bill will be tabled and discussed and then passed in both the houses of Parliament. The state legislatures will have to table their own state GST bills and at least half of the states will be required to pass the bills.

Only after this lengthy process will GST come into force.

The idea of moving towards the GST regime was first mooted by the then finance minister P. Chidambaram in his Budget for 2006-07. Initially, it was proposed that GST would be introduced by April 1, 2010.

The government today ratified the methodology used for fixing the export subsidy on raw sugar during the April-September period of the 2013-14 marketing year.

In February this year, the Centre had announced a subsidy for exports of raw sugar up to 40 lakh tonnes during 2013-14 and 2014-15 marketing years (October-September) to help the cash-starved industry to clear cane arrears to farmers.