GST crosses Lok Sabha milestone with 443 ayes, nil noes

The Constitution (122nd Amendment) Bill for goods and services tax (GST), which Prime Minister Narendra Modi said will give "freedom from tax terrorism", crossed another milestone on Monday with the Lok Sabha (LS) voting unanimously for it with 443 ayes and nil noes.

The Bill, passed in the Rajya Sabha (RS) last week, was approved in the lower House of the parliament in May last year. But since it was amended in the RS, where the ruling BJP does not have the required strength, it had come back to the LS for ratification.

Addressing the LS on the historic Bill, Modi said GST, which will merge all indirect taxes such as excise duty, value added tax (VAT), octroi, luxury tax, entertainment tax and others into a single levy to create a seamless market across the country, stood for "Great Step by Team India" and "Great Step Towards Transparency".

Countering the criticism of the opposition for adopting double standards over the Bill by changing his views after he became the prime minister, Modi said that his "experience" as the chief minister helped him "understand the problems of the states". Modi as Gujarat chief minister had fiercely opposed the Bill during the United Progressive Alliance (UPA) regime.

He said the passage of the Bill was not the victory of any one party or government but of India's democracy. "That is why the discussion should not focus on who won and who lost. This is the victory of India's democracy and maturity of the India political leaders because despite our differences we have one voice (on the issue). Everybody should be congratulated and appreciated," he said.

The PM said the Bill will cure many ills in the India's tax system to alleviate poverty, improve tax-GDP ratio, curb black money, boost economic growth, stabilise prices and make India corruption-free.

"It will help in poverty alleviation. Today, 65% of the Indian households is below poverty line. We inherited the legacy of poverty, but we all desire to fight poverty. GST is a big platform to fight poverty," he said.

Further, he said implementation of GST will not allow banks to discriminate against certain section of borrowers and make "consumer the king".

"The ultimate message of GST is consumer is the king. Small businesses and consumers will benefit the most," Modi said.

Finance minister Arun Jaitley, who moved the Bill in the LS, said GST will arrest the cascading effect in indirect taxes, reduce tax evasion, expand tax base and improve ease of doing business.

He expected it to improve Centre-state relationship as they cooperate with each other to make the unified indirect tax a success.

"Both states and the Centre will gain from it," said Jaitley.

The Bill was cleared in the upper House after the main opposition Congress extended support on government meeting some of its demands including dropping of the controversial 1% additional tax, which was to be imposed on interstate movement of goods. The government, states, industry bodies and the Congress were able arrive at a broad consensus after extensive negotiations.

Post LS approval, the Bill will now need to be ratified by 50% of the 29 states and then sent to the President for his assent, after which a GST Council, represented by states and the Centre, will be formed.

"This (Constitution Amendment Bill) is an enabling amendment. After this, we will have to prepare three more laws. The draft will have to be prepared by the GST Council, and then two of those laws will have to come to the parliament – Central GST and the integrated GST (IGST). State GST (SGST) will be passed by various state assemblies," Jaitley informed the House.

Opposition raised concerns over whether GST Bill would be taken up as money Bill or finance Bill. Money Bill bypasses the RS while the finance Bill needs to be debated and voted upon in both Houses. Jaitley did not commit but said the government would go by the Constitution.

"What is within the definition of Article 110 will be a money bill, otherwise it will not be a money bill," is all the assurance he gave.

He agreed with the opposition's view that indirect taxes were regressive because under it the rich and the poor got taxed at the same rate, and so should be reduced.

There has been suggestions from various quarters that the government should increase direct taxes. To this, Jaitley said there were many constraints in pushing up direct taxes.

Another prickly issue the government would have to handle in coming days would be to balance the GST rate with revenue earnings of the states. As per the road-map, it is looking to roll out the new unified indirect by April 1, 2017.

MS Mani, senior director, Deloitte Haskins & Sells LLP, said now that parliamentary process was nearing completion, corporates needed to gear up and prepare for the opportunities and challenges of the new tax regime.

"Corporates should now consider April 2017 as the Go Live date as the government's determined efforts would ensure that they adhere to the stated timelines," he said.

(with inputs from Amita Shah)