Fate of GST Bill in Rajya Sabha: Clouds of dissonance on the ongoing Monsoon session

The much talked about Goods and Services tax (GST) Regime has been creating a buzz amongst all, eagerly waiting for the monsoon session of the Parliament to commence with the hope that the much awaited Constitution (122nd Amendment) Bill, 2014 on GST (˜122nd CAB™or ˜GST Bill™) will be passed.

The Rajya Sabha Select Panel on GST cleared its draft report by supporting the larger points proposed by the Government in the 122nd CAB and by recommending a liberal compensation package for the States. In the process, the Panel shot down all points of objections raised by the Congress, prompting the party representatives to submit dissenting notes demanding 15 amendments to the 122nd CAB.

Select Panel arrives at middle ground on GST Submits GST report in the Rajya Sabha today

With the first day™s proceeding of the Monsoon session of the Parliament getting distressed, the Select Panel of the Rajya Sabha has submitted its report today in the Rajya Sabha amid Opposition furore over the Lalit Modi row.

The landmark bill on GST today won majority support of the Rajya Sabha Select Panel, which endorsed almost all the provisions while also agreeing to demands of parties like TMC for 5 years compensation to the States.

The Select Panel, headed by BJP™s Bhupender Yadav, in its report submitted to the House suggested following 3 modifications to the 122nd CAB:

  • Compensation to States for 5 years (Clause 19): The Select Panel recommended that the 122nd CAB should provide full compensation to the States for the revenue loss for 5 years;
  • Clarification on 1% additional tax (Clause 18): The Select Panel felt that the 1% additional tax on Inter-State supply of goods may lead to cascading of taxes and thus has recommended a mechanism to do away with the contentious issue of a cascading effect of 1% tax on Inter-State supply of goods and is believed to have suggested the tax to be made liable only in the case of Inter-State supply of goods for a consideration, which might mean the movement of goods within the same company will not be subject to such extra tax;
  • Moderate GST rates (Clause 12): The Select Panel has recommended moderate GST rates, with as many goods under it as possible. However, the rates would be decided by the proposed GST council and these wouldn™t be part of the 122nd The sub-panel of the empowered committee of State Finance Ministers had recommended a RNR of 27%, which currently is being looked into by a committee headed by Chief Economic AdvisorArvind Subramanian and its report will be submitted within 4-6 weeks.

The Congress puts down its objections to the 122nd CAB in writing

While, the draft report was formally adopted and was expected to be submitted to the Rajya Sabha later this week, the Congress had appended a four-page dissent note and submitted on Monday, the following 8-point dissent note to the 122nd CAB:

  1. Ceiling the GST rate @ 18%.
  2. Setting up of a GST Compensation Fund.
  3. Clear definition of the word Supply/ies.
  4. Tobacco and tobacco products, alcohol for human consumption and electricity supply should be included in clause 12 of CAB with a condition of being included by the council within 5 years.
  5. Voting share of States to be increased to 75%.
  6. Setting up of GST Dispute Settlement Authority to be set up.
  7. Sources of revenue of the Panchayats and Municipalities must be safeguarded.
  8. Special consideration by the council towards States and Union Territory who™s population does not exceed 20 lakh.

GST in the Country by April, 2016: Uncertainties still prevail

There exists uncertainty with regard to the passing of the GST Bill endorsed by the Select Panel of the Rajya Sabha as Congress, the largest party in the Rajya Sabha where the BJPled alliance is in a minority, could insist on the changes it proposed in the Bill, when it comes to voting. The report, however, is marked by dissent notes from Congress, AIADMK and Left parties, which have expressed their opposition to the 122nd CAB in the existing form.

Passage of the 122nd CAB in the Rajya Sabha requires two-third majority. That is an arduous task for the Government given that in the 245-member House, the ruling coalition has only 65 seats, while Congress has 69. Thus, the BJP Government will have to depend upon support of regional parties and allies for passage of the GST Bill. Further, the absence of a few political parties including Trinamool Congress at the meeting of the Select Panel has made their support towards the GST Bill uncertain.

The Revenue Secretary, Shri. Shaktikanta Das told Administratively we are taking all steps both Centre and states to meet April 2016 deadline. Effort would be to have reasonable rate of GST so that GST experience is a successful experience for the whole country.

However, as per the political observers if the Bill is not passed in the Monsoon session, the April, 2016 deadline would be too ambitious as it will get postponed to the Winter session, and will be required to be ratified by more than half of the States and Central and State laws of GST enacted in time.

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