A day after the government tabled the Goods and Services Tax (GST) Bill in the Lok Sabha, Finance Minister Arun Jaitley Saturday urged industries to build public opinion in states for passing the law on reforming India’s indirect tax system.
“Any state that does not fall in line (with GST), my advice to all stakeholders is go to states to raise the issue, to convince, to pressurise public opinion in all the states,” Jaitley said, addressing an event of the Federation of Indian Chambers of Commerce and Industry.
Hinting that complete consensus is awaited on a bill that needs to be passed by a two-third majority in both the houses of parliament and by the legislatures of half of the states to become a law, the finance minister called for “a shared national vision on basic issues”.
“Today, there is a clear choice before us, reform or miss the bus. It is literally a choice that the future generation is not going to pardon us if we miss the reform bus again,” Jaitley said, referring to the “strange convergence” of ideologically opposed parties in blocking reform measures, particularly in the Rajya Sabha.
The United Progressive Alliance (UPA) government had introduced a Constitution Amendment Bill in the Lok Sabha towards the introduction of the GST in 2011.
States sought a five-year compensation package and asked for its inclusion in the bill.
Jaitley introduced the bill in the lower house Friday, saying the objective of the legislation is “the seamless transfer of goods and services across the country”.
“The GST will be a win-win situation for both the states and the centre. The GST will be the single most important tax reform, with potential to convert the entire country into a single market and avoid taxation over taxation,” he said.
The bill, which will be taken up for discussion in the budget session of parliament in February, proposes a national sales tax that will replace a myriad of overlapping state duties that deter investment.
Jaitley said he had achieved a “near consensus” with the Empowered Committee of State Finance Ministers on GST in a meeting here.
“This is not a partisan legislation. We will ensure that the interest of every state is taken care of, that no state will lose a rupee of revenue,” Jaitley said.
GST reform would strengthen the principle of “co-operative federalism” as the central and state governments would need to work together to take decisions which would require 75 percent majority approval in the GST Council.
Jaitley told the house that states will receive Rs.11,000 crore this fiscal towards partial compensation of the losses suffered by them for reduction in central sales tax (CST).
While the CST is levied by the central government on inter-state movement of goods and collected by states, the issue of compensation arose because the central government cut the CST from 4 percent to 2 percent in phases, after state-level VAT was introduced from April 1, 2005.
Earlier, finance ministers of seven states in a meeting here Thursday rejected the draft Goods and Services Tax (GST) Bill, saying it does not address their concerns on the issues of compensation, entry tax, and the tax on petroleum products.
The states also want petroleum, alcohol and tobacco to be kept out of the purview of the GST.
Seen as a key to facilitate the industrial growth and improve the business climate in the country, the GST bill needs to be passed by a two-third majority in both the houses of parliament and by the legislatures of half of the states to become a law.
By subsuming most indirect taxes levied by the central and state governments such as excise duty, service tax, VAT and sales tax, GST proposes to facilitate a common market across the country, leading to economies of scale and reducing inflation through an efficient supply chain.