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GST looks closer to becoming a reality now

Posted Date : 22-Jul-2015 , 10:34:31 pm | Posted By CASANSAAR print Print
With the select panel of the Rajya Sabha endorsing majority provisions of the GST bill, the landmark tax reforms legislation looks closer to becoming a reality soon after a decade of political flipflops and wranglings. The new tax system will unify the nation’s 29 states under a single sales tax.

The Rajya Sabha select committee, headed by BJP’s Bhupender Yadav, submitted its report to the House on Wednesday, suggesting minimal changes in the clauses pertaining to compensation and levy of 1 per cent additional tax by states on inter-state supply of goods.

While the report does carry dissent notes from the Congress, AIADMK and Left parties, but many others, including Trinamool Congress (TMC), Janata Dal-United (JDU) and Congress ally NCP pledged support to the GST bill in Parliament. This now raises a fair chance that the landmark bill might eventually see the light of the day by its deadline of April 1, 2016.

The ruling BJP government does not have a majority in Rajya Sabha and will have to depend upon support of regional parties and allies for passage of the bill. In the 245-member Upper House, the bill needs the support of 163 members but the BJP has only 48 members and along with its allies, the strength of the ruling alliance comes to 64. Being a constitution amendment bill, the legislation has to be approved by two-third members of the Rajya Sabha. The Congress with 68 members in the Rajya Sabha is firm in its opposition to the bill in its current form.

A failure to get the bill passed in the session of Parliament will make it almost impossible to implement the tax as the same also required to be vetted by at least 50 per cent of the state assemblies. The Lok Sabha has already given its approval to the bill. But if the Rajya Sabha passes a different version of the legislation, then the Lower House will need to ratify the changes again.

If approved, the legislation can be a big positive for companies focused on the domestic economy. Manufacturing-linked sectors like capital goods, auto, auto components, infrastructure, cement and various consumption-linked sectors like FMCG, white goods makers, electronic hardware, software, telecom manufacturing and mining will benefit from a positive outcome on the GST legislation, which will lead to a new indirect tax regime in the country by doing away with multiple taxation at various levels.

While states’ demand for compensation and the rate at which the GST will be levied remain two other big hurdles, they will not pose much difficulty in getting the bill legislated. Yet, a high rate for the new goods-and-services tax — offering more revenue to distribute back to states — could limit the gains to businesses and consumers.

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