Hope floats again for GST bill

Centre and states reach agreement on fixing rate, bill may be passed by Rajya Sabha next week

NEW DELHI: India on Tuesday took a big step towards rolling out the landmark goods and services tax (GST), with the Centre and states agreeing on broad principles to fix the tax rate.

The consensus could see the bill’s passage in the Rajya Sabha as early as next week, dramatically altering India’s indirect tax structure by replacing a string of central and local levies such as excise, value added tax and octroi into a single unified tax and stitch together a common national market.

Finance minister Arun Jaitley met state finance ministers on Tuesday as the government stepped up efforts to iron out differences on the proposed GST that has remained stuck in Parliament for want of political consensus.

The meeting discussed the changes that Congress has sought, including the demand for capping the GST rate at 18% in the Constitution Amendment Bill itself.

“As you know that no tax rates are provided in the Constitution. It was discussed and the conclusion reached that Union finance minister will communicate to other parties,” said West Bengal finance minister Amit Mitra, who is the chairman of the empowered committee of state finance ministers on GST.

“He will explain it to them that it can’t come in (the) Constitutional Amendment (bill) but it can come in GST Bill or GST Act.”

The supplementary legislation — the GST Act — may specify a cap within which the rates should ideally be maintained. It is an enabling legislation that is necessary for rolling out the new tax system.

According to the bill, passed in the Lok Sabha in May 2015, the rates were to be decided by a GST council headed by the central finance minister with state finance ministers as members.

The Centre has been arguing that a cap on the GST rate in the Constitution Amendment Bill would make the system rigid. The Constitution will have to be amended with a two-thirds majority each time the rates needed to be changed in the future.

The Congress increasingly found itself isolated as regional parties supported early passage of the Bill.