A select committee of Rajya Sabha on Monday signed off on the goods and services tax (GST) bill, setting the stage for its introduction in the upper House and eventual implementation from 1 April 2016.
Passing the 122nd Constitution amendment bill in the Rajya Sabha in the first half of the monsoon session starting 21 July is critical if the government has to meet its own deadline for the new indirect tax regime aimed to create a national common market.
To be sure, though it was adopted by a majority, the Congress and Left parties such as Communist Party of India (Marxist) and Communist Party of India, which are in a minority in the 21-member committee, will submit dissent notes on Tuesday.
According to a PTI report, the centre has agreed to compensate states for losses arising from the implementation of GST for a full five years, a move aimed to help secure support from the states. The government will move amendments to the bill to mention that states will be compensated for five years, the PTI report said. The previous version of the bill said the compensation would be paid for “up to five years”.
The centre had said states will be fully compensated for losses in the first three years, 75% in the fourth year and 50% in the fifth year. However, all states had sought full compensation for the entire five years, a demand the committee accepted.
Two people aware of the development confirmed that the committee report was adopted and political parties had time till Tuesday afternoon to submit dissent notes.
“The report was technically adopted today (Monday) but there is time until Tuesday afternoon to put in dissent notes. There is not much change in the bill but the government has relaxed the condition of the compensation to the states for loss of revenue arising on account of implementation of GST for a period of five years,” a person aware of developments said.
The National Democratic Alliance (NDA) government is keen that the bill is passed in the monsoon session.
Senior ministers in the government are trying to convince All India Anna Dravida Munnetra Kazhagam leaders not to vote against the bill when it is taken up in Parliament.
The government is worried that opposition parties, especially Congress and Left, will try to stall proceedings of the House demanding action against external affairs minister Sushma Swaraj, Rajasthan chief minister Vasundhara Raje and Madhya Pradesh chief minister Shivraj Singh Chouhan over various scandals.
“The real question is if the Rajya Sabha will function or not. If we are able to make the Rajya Sabha function, we are hopeful that the bill will get passed,” a senior NDA leader from the Rajya Sabha said.
Members of the Bharatiya Janata Party are also talking to opposition parties to allow the passage of the bill. The government already has the consent of Samajwadi Party, Trinamool Congress, Biju Janata Dal, Nationalist Congress Party and Bahujan Samaj Party for the GST bill.
“While we welcome the adoption of the report by the Rajya Sabha select committee on the Constitution amendment bill, the 1% non-creditable origin tax on inter-state supply of goods remains an area of serious concern for the industry and hope the government finds an effective solution to this distortion. More so when the select committee has agreed to the demand of states being compensated for five years for any revenue loss under GST,” said Harishanker Subramaniam, national leader, indirect tax services, EY, in a note. “The next logical step would be to see through the passage of the bill in the monsoon session of the Parliament without any political disruptions,” he said.
Chief economic adviser Arvind Subramanian on Monday said the committee he chairs to finalize a revenue-neutral GST rate will submit its report within four to six weeks.
“The government will do its best to stick to the April 2016 deadline,” he added, speaking on the sidelines of a function in New Delhi.