CONG HINTS AT FLEXIBILITY ON GST RATE CAP
NEW DELHI: The prospects of a nationwide goods and services tax (GST) have brightened with the government indicating its willingness to reach out to the Opposition and hammer out a solution on the key demand of specifying a cap on rates.
Once adopted, GST will dramatically alter India’s indirect tax structure by replacing a string of central and local levies such as excise, value added tax and octroi with a single unified tax and stitch together a common national market.
In a major shift of stance, the Congress’ Jairam Ramesh said Saturday that the party’s demand for a cap on GST rate in the Constitution amendment bill is not cast in stone. “If the cap in the Constitution amendment bill is unacceptable, then the government can explore the option of keeping it in the GST bill… If the government wants, a creative use of the English language can solve the impasse.”
If the cap were to be kept in the GST bill, which would be passed after the 122nd Constitution amendment bill, the government would not have to amend the Constitution each time it needed to impose a levy.
The Congress’ deputy leader in the Rajya Sabha, Anand Sharma, was also quoted as saying the party wanted the government to “ringfence” the tax rate. Sources told HT the government saw this statement as an opportunity to find a way out of the impasse, which has been the main hurdle to its reforms initiative.
The Congress had been pressing for a GST ceiling rate of 18% specified in the main bill itself.
This was different from the bill passed in Lok Sabha in May 2015 that did not specify a rate, and left it to a GST council headed by the finance minister with state finance ministers as members to decide the rates. Top government sources told HT that while it would not agree on capping the GST rate in the Constitution amendment bill, a ceiling on the rate can be specified in some manner in the “supplementary” legislations that will have to be passed after the main central law is enacted.
These include the state GST law, the central GST law and the integrated GST law — all enabling legislations necessary for rolling out the new tax system.
“Fixing the rate in the legislation would make the system extremely rigid as the Constitution would have to be amended with a two-thirds majority if the rates
needed to be changed in the future. The supplementary legislations, however, can specify a range within which rates should ideally be maintained,” a source said.
The government, led by finance minister Arun Jaitley and parliamentary affairs minister Ananth Kumar, may initiate discussions with the Congress-led Opposition to iron out the glitches ahead of Parliament’s monsoon session, which begins on July 18.
There is heightened expectation that the government will introduce the bill this session depending on Rajya Sabha chairperson Hamid Ansari’s concurrence.
Lack of political consensus has kept the Constitution amendment bill stuck in the upper House, where the ruling NDA is in a minority, since May last year.
Both Houses and at least half of the state assemblies will have to ratify it before it finally becomes law. It has missed several rollout deadlines, including the last one of April 1, 2016.