Finance Minister Arun Jaitley on Wednesday tabled the GST Constitutional Amendment Bill in the Rajya Sabha, kicking off a scheduled five-hour debate on the landmark tax reform.
Speaking on the GST Bill, former Finance Minister P Chidambaram, who first introduced the tax proposal in his Budget Speech in 2006, reaffirmed that the Congress party was "not opposed to the idea of GST", and called it one of the "most reformative tax measures".
However, he pointed out that the current Amendment bill was clumsily drafted.
Chidambaram also described GST as an inherently 'regressive' tax while calling for a low rate that is capped at 18% instead of 24%, as has been recommended by a government-appointed panel. "GST is an indirect tax and it is by definition a regressive tax. It falls equally on the rich and the poor," he said, adding that "As a matter of policy regressive, indirect taxes should be kept as low as possible."
He also warned the government that the judiciary would strike down the GST Amendment Bill if it failed to mention a tax rate in the legislation.
"The judiciary will reject it if the GST Bill does not mention a tax rate. You will come back to the parliament again," he cautioned.
The government on Tuesday circulated among Rajya Sabha members a list of nine amendments to the Goods and Services Tax (GST) Constitution Amendment Bill, which includes yielding to the Congress demand of scrapping a contentious one per cent levy on inter-state supply of goods.
The Bill will be taken up in the Rajya Sabha on Wednesday.
Other amendments relate to compensating states for revenue loss for up to five years and requiring the GST Council to establish a mechanism for adjudication of disputes between the Centre and states or among states.
The 2014 bill, passed by the Lok Sabha, had authorised the GST Council to decide upon the modalities for resolution of disputes, but the Congress demanded the mechanism be spelt out. The government has, thus, accommodated two of the Congress’ three demands.
The amendments clarified that the states’ share of the Integrated GST (iGST) would not form part of the Consolidated Fund of India, and the term “iGST” itself was being replaced by “goods and services tax levied on supplies in the course of inter-state trade or commerce” in clause 12 dealing with apportionment of the proceeds. It was also clarified that Central GST (CGST) and the Centre's share of iGST would be distributed between the Centre and the states.
The GST will subsume central excise duty, service tax and state value-added tax or sales tax.
Opposition parties, including the Left and regional parties, were undecided whether to push for any amendments of their own in the bill. Parliamentary Affairs Minister Ananth Kumar said all political parties had come together to pass the bill “unanimously and now is not the time for hairsplitting”.
All parties have issued whips to their MPs to be present in the Rajya Sabha on Wednesday and also on Thursday when the Lok Sabha is likely to take up the Bill after the Upper House passes it.
Congress Vice-President Rahul Gandhi consulted party leaders Mallikarjun Kharge, P Chidambaram and Anand Sharma, among others, about Wednesday’s strategy in Parliament. Finance Minister Arun Jaitley briefed Bharatiya Janata Party MPs on the Bill at a weekly parliamentary party meeting. Later in the day, Jaitley met officials of his ministry.
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Sitaram Yechury, general secretary of the Communist Party of India (Marxist), said, “What we are going to discuss on Wednesday is merely the constitutional amendment that envisages a uniform tax regime countrywide. The actual GST bill will be considered subsequently, once half the states ratify the constitutional amendment.”
Yechury said the Left and regional parties had concerns the passage of the GST Bill would take away their right to raise revenue. “I met the finance minister to explain our concerns, which he agreed to address,” Yechury said. He and others will demand an assurance during the discussion that these concerns will be addressed when the GST Bill is taken up.
Jaitley at a meeting with his state finance ministers last week promised to keep the incidence of the tax low while safeguarding revenue of the states.
Yechury added any attempt by the government to categorise the subsequent GST Bill as a Money Bill -- which is not voted upon in the Rajya Sabha where the government is in minority -- would be resisted by all Opposition parties.
Yechury as well as the Trinamool Congress’ Derek O’Brien pointed out some of the amendments in the bill were vaguely worded. During a discussion on a calling attention motion in the Rajya Sabha, O'Brien said the list of amendments did not contain amendments to Clause 19 that provided for compensation to states for revenue loss incurred in the first five years.
"The amendment circulated by the finance minister does not contain that amendment. If it is an oversight, it needs to be corrected," O'Brien said. The chair asked O'Brien to raise the issue on Wednesday when the Bill would be taken up.