The Congress on Wednesday softened its stand on the Goodsand Services Tax (GST) Constitutional Amendment Bill in the ongoing monsoon sessionof parliament. Senior Congress leader and party spokesperson, Rajeev Shuklatold BloombergQuint that the Modi government has agreed to most of the party's demands.
Commentingon the earlier points of contention in the proposed model of the GST, Shuklasaid that the government has accepted their demand of compensating states forrevenue loss over 5 years and revoked the 1 percent additional levy on inter-state sales.
On thethird demand of capping the GST, Shukla said, “Theyhaven't accepted our remaining demand of capping the GST rate through aconstitutional provision; that is okay. Butit (the cap on GST rate) will be a part of the GST Bill. And now the discussionshave shifted to who takes a call on the GST cap, and whether it comes under the purview of the GST Council.”
The Congress' stand comes after the Union Cabinet approved changes to the Constitution(One Hundred and Twenty Second Amendment) Bill.
Bloomberg reported on Thursday that the government will hold another round of talks with the Congress party on the GST.
Also Read: GST Bill: Centre, States Agree on Lower Tax Rate, Compensation For States
State governments had raised concerns on the probable loss of revenue when the GST is implemented, and sought compensation for same. The 1 percent tax on inter-state sales, proposed to compensate manufacturing states for a revenue loss, was also opposed by state governments. In its crux, the GST aims at maximising revenue for states where commodities are consumed. In principle, it will simplify the tax system, boost tax revenues and ensure better compliance.
“It would be levied on the basis of the destination principle. Thus, exports would be zero-rated, and imports would attract the tax in the same manner as domestic goods and services. Inter-state supplies within India would attract an Integrated GST (aggregate of Central GST and the State GST of the destination State),” according to an EY note on GST.
“It is not looking too difficult for the government to pass the GST this session. The next contentious issue will be on the composition of the arbitration body that will resolve disputes between state and governments in cases of inappropriate sharing of tax revenue after GST,” another senior Congress leader told BloombergQuint on the condition of anonymity. He requested anonymity as he is a member of the Lok Sabha (lower house of parliament) and the Bill is pending in the Rajya Sabha (upper house of parliament).
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