New Delhi: The Constitution Amendment Bill on Goods and Services Tax, that will pave the way for a mega tax reform, was tabled in the Lok Sabha today. In the Rajya Sabha, Finance Minister Arun Jaitley said the government would formally take up the bill and seek to pass in the next session of Parliament. The current session ends on Tuesday next.
Here is your 10-point cheat-sheet to the Goods and Services Tax (GST):
- The GST provides a major taxation reform by introducing a national sales tax that will replace a myriad of overlapping state duties that deter investment. The cabinet this week approved a constitutional amendment bill that paves the way for the introduction of GST.
- Mr Jaitley described the GST as the "single biggest tax reform since Independence" and a "win-win situation" for both the Centre and states and said the bill would not hold a "fear of the unknown" unlike the Value Added Tax or VAT.
- The Finance Minister said the concerns of all states have been addressed in the new provision of the bill after consultation. He said the interest of states would be adequately protected and that he did not foresee a situation where states would be the losers.
- Investors and manufacturers have long advocated the GST as a way to simplify taxes while broadening the tax base, adding as much as 2 percentage points to economic growth in Asia's third-largest economy.
- Some of India's 29 states were reluctant to give their assent for fear of revenue losses. In a compromise, Mr Jaitley has offered to compensate the states for any loss of revenues following the implementation of the GST.
- The government aims to bring the tax into effect from April 1, 2016.
- With only two working days left in this session the Bill will be taken up for debate in the Budget session which will begin in February.
- Since the bill seeks to amend the Constitution, it needs to be cleared by a two-third majority of both houses of Parliament. The government will face no problem in the Lok Sabha, where it has huge numbers, but it is in a minority in the Rajya Sabha and will need the opposition's support.
- The proposal will then have to be cleared by at least half of the country's state legislatures before it becomes a law.
- GST will replace a number of indirect taxes currently levied by both the Central and State governments and seeks to provide a common national market for goods and services. Once in force, GST will reduce the total number of indirect taxes apart from the customs duty (only on imported goods) to just three.