1. A Rajya Sabha select committee endorsed the Constitutional Bill for the Goods and Services Tax (GST), but uncertainty over whether it could be passed by the Upper House in the monsoon session persisted. This is because the Congress, the largest party in the Rajya Sabha where the BJP-led alliance is in a minority, could insist on the changes it proposed in the Bill, when it comes to voting. Also, though the political support for the Bill seemed to grow over the last few weeks, the stance of some other major parties still remained unclear.

2. A Rajya Sabha select committee is understood to have recommended a mechanism to do away with the contentious issue of a cascading effect of one per cent tax on inter-state supply of goods and is believed to have suggested the tax to be made liable only in the case of inter-state supply of goods for a consideration, which might mean the movement of goods within the same company will not be subject to such extra tax.

3. It also accepted a demand by most States that the Constitution Amendment Bill on GST should provide full compensation to them of the revenue loss for five years. The committee, sources said, it was also understood to have recommended moderate GST rates, with as many goods under it as possible. However, the rates would be decided by the proposed GST council and these wouldn’t be part of the Constitution Amendment Bill.

4. The sub-panel of the empowered committee of State Finance Ministers had recommended a Revenue Neutral Rate (RNR) of 27% which currently is being looked into by a committee headed by Chief Economic Advisor Arvind Subramanian who would submit his report within 4-6 weeks.

5. The Congress has appended a four-page dissent note and submitted the following 8-point dissent note to the bill. The sources said that the Party will not support the bill unless it incorporates the amendments proposed by the party:

• Ceiling the GST rate @ 18 per cent;
• Scrapping of the proposal to levy an additional one per cent tax;
• The compensation to States should be deposited in a fund under the administrative control of the GST Council;
• “Tobacco and tobacco products, alcohol for human consumption and electricity supply and consumption” should be included in clause 12 of Constitution Amendment Bill with a condition of being included by the GST Council within 5 years;
• Voting share of States to be increased to 75 per cent;
• Setting up of GST Dispute Settlement Authority;
• Sources of revenue of the Panchayats and Municipalities be safeguarded –
• Clear definition of the word “Supply/ies”;

 

Note:

The Constitutional Amendment Bill requires two-thirds of the members of the Upper House to be present and voting. Subsequently, it will have to be ratified by at least 15 of the 29 states. The Government is hopeful that the Bill will be passed in the monsoon session so that the GST regime can be introduced by the deadline of April 1 next year.

If the Bill is not passed in the monsoon session, the April 2016 deadline would be too ambitious as it will get postponed to the winter session.

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