Bihar becomes second state to ratify GST Constitution amendment Bill

Last week, Assam became the first state to ratify the GST

Bihar today ratified the Goods and Services Tax (GST) constitution amendment Bill, becoming the second state, and the first non-Bharatiya Janata Party (BJP) ruled state, to do so. Last week, the legislative assembly of BJP ruled Assam had become the first state in the country to ratify the Bill. The Bill, passed by Parliament in its monsoon session, needs to be ratified by 16 of the 31 state assemblies to become law.

Bihar has a bicameral legislature. Today, the Bihar Assembly as well the Legislative Council unanimously ratified the Bill at a special one day session. The Bihar assembly session had concluded earlier this month, but Bihar Chief Minister Nitish Kumar had assured Finance Minister Arun Jaitley in a telephonic conversation that his state would ratify the constitution amendment Bill at the earliest.

The Bihar government, which has lost revenue after implementing prohibition since April 1, has hopes that the tax reform would bring more revenue to the state coffers. "Bihar has played a crucial role for GST to move ahead and it will be most beneficial for us as we are a consumer state," Chief Minister Kumar said in the assembly.

He said the proposed tax reform will bring services under the tax ambit. "This will give valuable resources to the state, help us curb tax evasion because of the GST network and simplified tax administration means higher compliance. It will also improve ease of doing business as it will turn the country into unified market place," Kumar said.

The chief minister also said that his support to the Bill helped Prime Minister Narendra Modi to win the support of opposition parties. The CM also reiterated that he was opposed to the Congress party's demand for a tax slab to be fixed for the GST in the constitution amendment bill. The Congress is a junior ally in his government, which primarily comprises his Janata Dal (United) and Lalu Prasad Yadav-led Rashtriya Janata Dal.

Kumar demanded that the union government must share tax collecting powers with the states. "There must not be dual tax administration in the country. The states must be given powers to collect central GST taxes, which will be credited into the Centre's consolidated funds through the GST network. Dual administration will lead to complex systems, which would lead to lower compliance rates. We will discuss it with other states," he said. Bihar has also asked the union government that it must share databases regarding service sector with the states.

Senior BJP leader Sushil Kumar Modi termed GST a major reform since the economic reforms in 1990s. Modi, a former chairman of the empowered committee of the states' finance ministers on GST, said in the Legislative Council: "This bill has unified the whole country. It is a destination based consumption tax and will be paid only by people at the point of consumption. This means Bihar and states like us will hugely benefit. There will be only one tax and there will not be any cascading effects that will make prices go down, Due to this, it will also bring prices down in the longer run."

With Assam and Bihar having ratified the Bill, it now needs to be ratified by 14 more assemblies. Once that is done, the GST Council will be constituted and help the Finance Ministry prepare drafts of the Central GST, Integrated GST and State GST Bills. The Modi government hopes to bring these three Bills in the winter session of Parliament.