In Summary
The Lok Sabha passed the four supporting bills which would facilitate the implementation of the Goods and Services Tax (GST), a new indirect taxation regime which the Narendra Modi government has put all its bets on.
The Central GST Bill, State GST Bill, the Integrated GST Bill and the GST (compensation to states) Bill were tabled in the lower house of parliament by Finance Minister Arun Jaitley, who called it a "unique experience" for the country.
The bills were debated in the Lok Sabha for a marathon seven hours, without breaking for lunch, before they were passed.
The passage wasn't easy though.
A number of issues were raised during the debate which included stripping the parliament of its power to decide on taxation issues, the technological readiness of the GST Network, increased compliance challenges for businesses, the language of the bills, and the establishment of an anti-profiteering authority.
Here is Finance Minister Arun Jaitley’s closing reply to the concerns around GST:
18,000 Man-Hours Spent In Designing The 4 GST Bills: Hasmukh Adhia
Soon after the four GST bills were approved by Lok Sabha Revenue Secretary Hasmukh Adhia told reporters that 18,000 man-hours were spent in designing the bills and that he hoped there would be no flaws in the implementation of GST.
Adhia said the government will seek the President's permission to table the bills in Rajya Sabha and a discussion on them in the upper house is likely next week.
The GST Council is expected to pass all nine sets of rules after its next meeting on March 31.
A GST rollout by July 1 is possible, Adhia added, assuring industry that it will be informed about the laws and rules three months prior to its implementation.
Great Achievement. Now Shift Focus To Finalising Rules: PwC
The passage of the bill in one day, even after political resistance, is a great achievement for the government, according to Pratik Jain, partner at PwC. The next step would be to finalise rules, and rates so that it facilitates smooth transition for businesses to the new tax regime, he added.
In terms of next step, focus would now be shifting to finalisation of Rules which are to taken up in the GST council on March 31st. Finalisation of these Rules are necessary for the businesses to prepare for the transition, particularly in terms of IT and systems related changes. It is likely that suggestions of the working groups constituted last week for few sectors would be taken into account while finalising the rules. However, if the suggestions require any legislative changes, then the Government might need to have a discussion in the GST council and then go to Lok Sabha again.Pratik Jain, Partner, PwC
Jain also said that businesses would expect the rates to be finalised by May.
It is important for the Government to ensure that 18 percent is a general rate and exceptions, particularly those falling under 28 percent category are minimised. Prices of products and services under GST would largely be the function of rates and with the proposed anti profiteering provisions, businesses would expect that these are finalised latest by early May for them to take timely decisions.Pratik Jain, Partner, PwC
Prime Minister Congratulates Citizens On Passage Of GST Bills
Prime Minister Narendra Modi has congratulated Indians on the passage of supporting GST Bills in a tweet.
All Supporting GST Bills Passed
The Lok Sabha has passed all the four supporting bills that will enable the Goods and Services Tax regime.
The four bills are:
- Central Goods and Services Tax Bill
- State Goods and Services Tax Bill
- Integrated Goods and Services Tax Bill
- Union Territory Goods and Services Tax Bill
Lok Sabha Passes CGST, IGST Bills
The Lok Sabha has passed the Central Goods and Services Tax Bill and the Integrated Goods and Services Tax Bill after clause-by-clause consideration.
Consideration of the other two bills is underway.
Finance Minister Arun Jaitley Begins Reply
Arun Jaitley said that the idea behind GST was to simplify the tax structure since the nature of economic activity was changing.
Can we have one tax, and each assessee has only one interface with one assessing officer?Finance Minister Arun Jaitley
GST framework will be more efficient, will have higher compliance, and would be difficult to breach, he added.
Parliamentary Powers Are Being Snatched: Joice George
An independent from Idukki, Kerala, Joice George argued that the bill takes away the parliamentary privilege of deciding tax rates by giving that power to the GST Council.
We will not have any say on the taxes paid by people who have elected us, George said.
He also asked the government to clarify how cash crops will be treated in terms of taxation. He added that growers of crops like coffee, rubber, cotton, tea and cardamom will be affected adversely under GST.
GST Impossible Without Strong IT Infrastructure: Rajeev Satao
Congress MP from Hingoli, Rajeev Satao argued that while big businesses have the IT backbone to shift to the GST regime, small businesses still do not have an idea about it.
He asked the government if the country had such a strong IT infrastructure to shift to the new regime, and if it does, has it been tested?
Is it foolproof?Rajeev Satao, Member of Parliament
Satao called the bill a beginning, rather than a game-changer.
Tread With Caution, Do Not Rush GST: Professor Saugata Roy
All India Trinamool Congress member Professor Saugata Roy said that no political party is opposing the GST bill in principle thus the government should ensure that it is prepared completely before implementation.
He stated that the Goods and Services Tax Network is going to be the biggest network in the world but it is not ready yet. So a breakdown in the system would mean that the indirect tax regime would collapse.
Citing cases of Australia and Malaysia, he said that the two countries have faced problems with GST, while other leading world economies like China and the U.S. have chosen to not have such a regime.
Roy added that the Centre seems to be in a hurry, and in this rush basic tasks like fitting items in tax slabs have remained unresolved.
"There are over 4,000 items, even services", he said.
Compliance Costs, Data Privacy Issues Need To Be Addressed: Supriya Sule
Supriya Sule, MP from Baramati, Maharashtra, asked the government to provide clarity on the precautionary measures taken to ensure that data would not leak from the Goods and Services Tax Network.
She stated that GSTN will be a private body with the government holding 49 percent stake. This would mean that critical data, related to businesses in all states, will uploaded on the network, and hence there needs to be checks for its protection.
Sule, daughter of NCP’s president Sharad Pawar, added GST implementation would require at least 36 registrations for business, hence compliance becomes challenging, especially for businesses that operate in multiple states.
While she was keen on the implementation of GST, she also questioned if just luxury goods will be able to compensate states, especially during economic crises like droughts, which her home state Maharashtra has been facing for over two years now.
Sule also talked about the risks involved in lending parliamentary powers to bodies like the GST council. She said while it would work fine now since the Bharaity Janata Party was in power in the centre, and majority of the states. However, it would become a problem when that is not the case.
Anti-Profiteering Clause Gives Way To Harrasment: Konda Vishwera Reddy
Telangana Parliamentarian Konda Vishwera Reddy said that there is no need for an anti-profiteering authority to be established as it paves way for harrassment.
Reddy said this was a move meant for political appeasement.
He also urged the government to speed up the process of defining tax slabs for various goods and provide clarity on them. As an example, he said that coconut oil is an edible item in Kerala, while it is a hair oil in Rajasthan. “How will you tax it?,” Reddy asked.
Also Read: Black Money Rhetoric And Anti-Profiteering Action
Rs 2,000 Crore Loss Annually For Andhra Pradesh: Jaydev Galla
Jaydev Galla, an MP from Guntur, Andhra Pradesh, has said that GST implementation would leadto a Rs 2,000 crore loss for Andhra Pradesh, which is already trying to recover from a financial slowdown since its bifurcation.
He said that the state will see a 9 to 14.5 percent reduction in taxes. He also requested a special case for Andhra Pradesh where compensation is given for ten years instead of the prescribed five.
The managing director of the Amara Raja Group, raised an issue with the choice of words in the bill with respect to the compensation from centre to states.
The Clause says Union “May” compensate the states. I move that this be replaced with “Shall” and the compensation be made binding on the government.Jaydev Galla, Member of Parliament, Andhra Pradesh
He asked the finance minister, why private banks like ICICI Bank Ltd. have 30 percent shareholding in the special purpose vehicle (SPV) to be set for the Goods and Services Tax Network. He also questioned why any state bank was not given stake in the SPV.
Don't Expect Too Much From GST, Cautions Bhartruhari Mahtab
Sole representative of the Biju Janata Dal party from Odisha Bhartruhari Mahtab called the GST bill "illusory", adding that its real impact will only be known one year after implementation.
He argued that while there have been tall claims surrounding the impact of GST, all that the common people wanted to know was if the prices will come down.
Also Read: GST To Have Minimal Impact On Inflation, Nomura Says
Mahtab also raised the concerns about Clause 171 subsection (2) of the bill, which provides for establishment of an anti-profiteering authority. He said it was a “retrograde” step, and that the Competition Law already exists to keep in check the abuse of dominant position.
The parliamentarian was particularly critical of the way agriculture was being taxed indirectly through the definition of an "agriculturist" in the bill. He also opposed bringing dairy farming and poultry farming under the ambit of taxation, since a lot of farm income is additionally supported by this.
One Nation, One Tax Only A Myth: Veerappa Moily
Congress leader Veerappa Moily questioned the government's motives on calling the GST a one nation, one tax measure. "This by no means is a game changer. It is only a baby step going ahead," Moily said.
Also Read: Four-Tier GST Rate May Lead To Classification Disputes: Economist
Putting the cumulative loss caused due to the delay in the implementation of GST at Rs 12 lakh crore, Moily said that the nation has been deprived of massive financial benefits over these years.
Moily also questioned the government's decision to leave real estate out of the GST's ambit. "How do you expect the tax bouyancy to come out if you leave out sectors like petroleum, real estate, tobacco out of the GST?" Moily questioned. He added that the real estate sector is one of the biggest generators of black money in the country.
Moily concluded by saying that the legislation is going to be a 'technological nightmare' and that the officials trying to implement it are suffering the most. He also questioned the government as to how will the tax payers be educated within three months on tax compliance," he said.
Switching to a new taxation measure in the middle of the financial year will bring its own accounting complications. GST has been withdrawn from many countries due to anti-profiteering and its inflationary impact. I would hope that the same fate does not fall upon our country,Veerappa Moily, Congress leader, Karnataka
Honour The "Pooled Sovereignty"
Jaitley invited recommendations during the discussion of the bill. However, he also asked for the "pooled sovereignty" between the centre and the states to be honored so that the agreement can be implemented.
The Unique Experience Called GST
Dealing with the GST Law is a “unique experience” for the Indian legislature, said Jaitley, adding that they need to make sure that the set up of the GST Council works smoothly.
It is incumbent on all of us to make sure that this federal institution (GST Council) works.Arun Jaitley, Finance Minister
What Are The 4 Bills?
- Central GST
- State GST
- Integrated GST
- Union Territory GST
An additional Compensation Bill has also been tabled which will provide a legal backing to the Centre's promise to compensate the states if their revenue growth rate falls below 14 percent in the first five years of the GST rollout.
The four "reformatory" Goods and Service Tax bills tabled in the Lok Sabha are a "revolutionary" step in India's tax history, said Finance Minister Arun Jaitley while addressing the Lok Sabha. The bills will be benefitial to both, the centre and states, he added. All four bills are expected to be passed in the Lok Sabha today.
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