On Aug 3, the Finance Minister once again introduced the GST bill to the upper house of parliament. The government felt confident that after the changes made to the bill since it was last debated in parliament; the bill will be passed finally. And it proved true.
But the passage of the GST was not without a number of ups and downs. With the amount of flak that the bill has seen, one wonders why it is so important?
For one, the centre is touting the Goods and Services Tax (GST) as the biggest tax reform since 1947. The basic idea is to do away with the dual tax system prevalent in the country and implement a single, uniform taxation policy for the entire nation. Some economists have claimed that this could add another two percentage points to India’s GDP growth rate.
The GST bill had been stuck in limbo in the Rajya Sabha since its introduction with the Congress-led opposition blocking its passage due to various points. Regional parties like the NCP, JD (U), and others have earlier expressed their support for the GST but with amendments.
Deliberations had been ongoing since then. The major bone of contention between the Congress and the NDA have been the Congress’ insistence that the government remove a 1 per cent tax allowed in the proposal for manufacturing states as their goods crossed the border into other states. The centre has now agreed to this demand with all compensations for 5 years to be handled by the centre. The government has also accepted the demand of a neutral agency to deal with state disputes.
In return, the Congress has agreed that that the rate of the GST will not be laid out in the constitution, a demand that had created not a few arguments between both parties. The constitution will now be updated to reflect the bill as a new law.
Though it seems that almost all states have now announced their support for the GST in its current, updated form, there were still deliberations going on in the Rajya Sabha around certain points, for example, the veto power that the Centre will enjoy, collection of revenues, etc. But it seems these have also been resolved.
Most industry sectors we have earlier spoken with have been in support of the GSM regime. It remains to be seen, obviously, how it would affect the current economic ecosystem but if the earlier excitement is anything to go by, it seems India Inc. is going to welcome the new tax regime with open arms.