After a marathon, seven-hour debate, India's landmark Goods And Services Tax bill was passed in the Rajya Sabha Wednesday with an overwhelming majority voting in favour of the bill, expected to untangle a web of indirect state and federal taxes, and bring about a uniform indirect tax rate across the country.
While Union Finance Minister Arun Jaitley did not give a final tax rate, he said the final tax rate will be "reasonable." The GST tax rate is widely expected to not exceed 18 per cent.
However, the GST bill, hailed as India's 'biggest tax reform' since independence, now faces the uphill battle of implementation, and will have to jump through a number of legislative hoops before it is ultimately implemented by its rollout date of April 1, 2017.
For instance, a majority of Indian states will have to pass the GST amendment, and work toward forming a GST Council that will finalise the nuts and bolts of the new tax. That may not happen until November and many believe the final rollout may go much beyond April, say experts. The amendments will also need to be cleared in the Lok Sabha again.
Wednesday's debate included heated discussions with both criticism and praises from opposing parties, with AIADMK members staging a walkout at one point.
Congress Leader and former Finance Minister P Chidambaram earlier on Wednesday had said the bill was "clumsily drafted" and argued the GST tax rate should be kept as low as possible as an indirect tax such as GST is essentially a "regressive tax." He added that Congress party was never opposed to the idea of GST, and, in fact, brought the bill to the Parliament more than a decade ago.
He, however, acknowledged the serious engagement undertaken by the government to involve discussions with all the parties and states, adding that a "far-reaching, revolutionary" change in tax couldn't have been passed as a purely partisan bill.
However, Jaitley declined to assure that the bill to be presented in November will be brought as a financial bill, stating that without the final details of the bill, it was not prudent.
He gave repeated assurances of debate and consensus on tax rates when the GST Council is formed. The two-thirds majority in the GST Council will help ensure that the tax recommendations are made with consensus with the states.
A major concern that came up again and again during the debate was the possible revenue loss for states, who worry that a destination and consumption-based tax like the GST would dry up revenues from states, hurting their economies.
Earlier, Union Finance Minister Arun Jaitley pointed out the proposed uniform GST tax will "radically change" the tax structure of the country.
Addressing the Rajya Sabha, he highlighted the benefits of the GST bill such as pooling states sovereignty, seamless transport goods across the country, reduce multiple taxes, check tax evasion, and enhance revenues for all states, and bring an equitable tax in consuming states.
"The enactment of GST will bring about the best economic management of the country," said Jaitley.
Here are some comments that were made by other Rajya Sabha MPs during the debate:
MP Derek O'Brien of TMC noted that people were tired of the political 'ping-pong' between Congress and BJP on the GST bill, and termed the tax "Girgit Samjhauta Tax." He added that Jaitley had changed his position on the bill depending on which side of the aisle he stood. He also called out Chidambaram and said that for Congress, the bill was equivalent to "Go Slow Tactics."
A Navneethakrishnan of AIADMK said GST will hurt many state revenues, particularly manufacturing-heavy states. He said Tamil Nadu being a manufacturing state stands to lose Rs 9270 crores if GST is implemented.
Sitaram Yechury of CPI(M) said a high GST tax rate was onerous and will "economically cripple" the majority of Indians, as well as alter the federal structure of the constitution. He added the Kerala 'fat tax' will have to be abolished under the GST regime.
AU Singh Deo of BJD said that state governments should be allowed to levy tax on tobacco and tobacco products as well as strengthen states' power in the GST Council.
Suggest a correction