The Lok Sabha has cleared four bills related to the Goods and Services Tax, setting the stage for 28 states to enact state laws over the next three months to roll out the new tax regime from July this year. The Integrated GST, Central GST, Union Territory GST, and Compensation Bill, will be followed by work in the GST council, to finalise rules and product and service-wise rates by the end of April.
The GST is all set to replace central excise, service tax, and state VAT and other levies, in addition to subsuming existing cesses and surcharges. Jammu and Kashmir will however, not be part of the current regime and will enact laws to ensure that its taxation system is linked with the Centre and other states for consumer benefits. Finance Minister Arun Jaitley promised the House that the regime will make things "slightly cheaper" and products such as petroleum, which are currently out of the net, will soon be included over a period of time. "Today, you have tax on tax, you have cascading effect. When all of that is removed, goods will become slightly cheaper," he said.
He also stated that a one-rate formula was highly regressive as a pair of chappals and a luxury car would face the same levy. The GST Council has recommended a four-tier tax structure of 5, 12, 18, and 28 per cent. Over the highest slab, a cess will be imposed on luxury cars, soft drinks, tobacco products, pan masala and coal to compensate states for potential revenue loss during the first five yeas of implementation. The FM said that once the new tax regime was rolled out, a businessman would have to deal with just one assessing officer instead of multiple authorities as is the norm now.
Several objections were raised with leaders from the Opposition questioning the disempowerment of Parliament in setting tax rates, the reduction in the fiscal autonomy of the States, the need for several tax rates when the principle is to be of 'one nation, one tax', and the levy of additional cess. "The States and the Centre have pooled their sovereignty in the Council. The recommendation of the rates will come from the Council. But the Council has two-thirds voting by the States and one-third by the Centre. The GST Council has been given the power to only make a recommendation regarding the model law. The Constitutional amendment gave that power in Article 279A. The plenary power to frame legislation can only be with Parliament or the state legislative assemblies as the case may be," Jaitley said.
