New Delhi: India inched closer on Wednesday to a unified tax regime with the Lok Sabha passing four supplementary measures that will enable the government to roll out the landmark Goods and Services Tax from July 1.
With the passage of these four enabling bills, the Centre hopes to meet the target implementing GST in around three months’ time.
Prime Minister Narendra Modi was one of the first to welcome the passage of the bills. “Congratulations to all countrymen over passage of the GST bills. New Year, New Law, New Bharat,” he tweeted.
The four bills which were passed are the Central Goods and Services Tax Bill 2017, the Integrated Goods and Services Tax Bill 2017, the Goods and Services Tax (Compensation to States) Bill 2017 and the Union Territory Goods and Services Tax Bill 2017. A host of amendments moved by the Opposition parties were rejected.
In his reply to a marathon seven-hour debate before the bills were passed in the Lower House, finance minister Arun Jaitley said the GST was likely to make a number of commodities “slightly cheaper”. He said that by doing away with the concept of tax on tax, the GST would also help curb inflation.
The GST rates will depend upon whether the commodity was used by rich people or ordinary citizens, Mr Jaitley said, adding that once the new regime was implemented, the harassment of businesses by different authorities would soon end.
The finance minister said the GST Council, comprising the finance ministers of different states and Union territories, had agreed to take a decision on bringing real estate within the ambit of the new tax regime within a year of its rollout.
Explaining why the GST Council had set multiple tax rates, he said that a “hawai chappal” and a BMW cannot be taxed at the same rate.
Food items are currently not taxed, and these will remain zero rated under GST. All other commodities would be fitted into the nearest tax bracket, he added.
The GST Council has recommended a four-tier tax rate structure — of five, 12, 18 and 28 per cent. On top of the highest slab, a cess will be imposed on certain luxury and demerit goods to compensate states for revenue loss in the first five years of GST’s implementation. The Central GST (CGST) law has pegged the peak rate at 20 per cent, and a similar rate has been prescribed in the State GST (SGST) law, which takes the peak rate to 40 per cent, which will also come into force only in financial exigencies.
The finance minister said the GST Council was working on the basis of consensus and slowly all items will come within the ambit of the new indirect tax regime.
Touted as the biggest tax reform since Independence, the GST will subsume Central excise, service tax, VAT and other local levies to create an uniform market. GST is expected to boost GDP growth by about two per cent and check tax evasion.
“The hard work put in by the GST Council members and officers bore fruit today in terms of four classic pieces of legislation passed by the Lok Sabha,” revenue secretary Hasmukh Adhia tweeted later. Mr Adhia went on to add that the passage of the four laws was a “historic milestone in the economic history of this country”.
