After an eight-hour debate, the Lok Sabha on Wednesday passed four GST or Goods and Services Tax-related bills putting the government on course for the launch on July 1 of the country’s biggest tax reform since Independence.
India is on the verge of creating history.India is just a step away from rolling out an indirect tax regime that will for the first time economically unify the country.The GST will unify India into a common market, eliminating a string of central and state levies.
The rollout has been made possible after the states and the centre agreed to merge their existing taxation powers to evolve a uniform tax structure.
The bills passed on Wednesday are the Central GST bill, the Integrated GST bill, the Union Territories GST bill and the compensation law. After Parliament’s nod, a state GST bill will be presented in state assemblies for their approval.
The government proposes to launch GST from July 1. It is estimated that rolling out of the GST can add up to 2 % to India’s economic growth.
Central taxes such as the central excise duty, additional excise duty, additional customs duty and service tax will all be merged into one CGST.
State levies such as VAT, sales tax, entertainment tax, purchase tax, mandi tax, luxury tax, octroi and entry tax will be subsumed into SGST.
The Centre will levy the central GST and integrated GST, while states will impose the SGST. Several countries have implemented GST or another form of a value-added tax, but Canada is the closest to India with a dual structure.
Finance Minister Arun Jaitley made a strong pitch for a simple tax regime in the debate, saying GST will make commodities “slightly cheaper”.
The GST Council has recommended a four-tier tax structure of 5, 12, 18 and 28%. On top of 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 years of implementation.
The minister defended the decision for multiple slabs, saying a one-rate formula was highly regressive as hawai chappals and a luxury car would face the same levy. He then went on to allay fears of food products facing the levy and said all farm goods would be kept out.
Jaitley said the government was trying to convince the council to bring real estate and petroleum products under GST’s ambit but stressed that any decision will be taken by consensus and not by a vote.