GST bill taken up in Rajya Sabha; Jaitley calls it one of the most significant tax reforms in India

Main opposition Congress and most other parties, except AIADMK, on Wednesday expressed support, with certain conditions, to the introduction of GST in the country as the Rajya Sabha took up the much-delayed bill to amend the Constitution for allowing the measure.

GST bill taken up in Rajya Sabha; Jaitley calls it one of the most significant tax reforms in India

New Delhi: Main opposition Congress and most other parties, except AIADMK, on Wednesday expressed support, with certain conditions, to the introduction of GST in the country as the Rajya Sabha took up the much-delayed bill to amend the Constitution for allowing the measure.


Moving the Constitution (122nd Amendment) Bill, 2014 amid thumping of desks by the entire House, Finance Minister Arun Jaitley said it was one of the most significant tax reforms in India in recent history that has been brought after a "broad consensus" with various political parties.

The bill was supported by Congress and most of the other parties like Samajwadi Party, JD(U) and Trinamool Congress. AIADMK, however, opposed the move.

"I am sure the enactment of GST will bring about the best economic management in its federal form," Jaitley said while commending the bill for consideration.

He said legislation was being enacted in the best possible way in the Indian federalism.


He said there was a need for a political consensus as far as possible to bring this bill and a process of dialogue with all major political parties and states was undertaken and the "best possible output was incorporated in the bill".

"A legislation of this kind cannot be made on the basis of a partisan approach. It impacts on the Centre and states and we have systematically worked towards a political consensus. There is as far a consensus as possible if not unanimity as far as language and contents of the bill are concerned," the Minister said.

Jaitley said, "the merits of the system are that it will convert India into one economic market and will introduce a uniform tax across the country, check evasion of tax. This would also give a boost as far as growth rate is concerned."


Speaking on behalf of Congress, former Finance Minister P Chidambaram said his party supports "idea" of GST as well as the bill, which he noted had been improved after the government held talks with various parties, including his.

"The Congress party was never against the idea of GST. The country is now ready to embrace the GST," he said, adding his party had opposed the 2014 bill but not the "idea".

"We wanted it (bill) to be more perfect. But there can never be a perfect bill," he said.

Spelling out the problems his party had with the bill, he said Congress wanted a cap of 18 per cent on the tax rate under GST, scrapping of 1 per cent retrogade tax besides setting up of disputes redressal mechanism for resolving issues arising out of tax disputes between states.

"The government was (initially) rather stubborn...I, on behalf of my party, loudly and clearly wanted that the tax should be not more than 18 per cent...Taxation is the exclusive power of Parliament, we can give some leverage to the Executive, but it should remain the domain of Parliament.

"I want an assurance from the Finance Minister that when the GST Bill is brought, it will brought as a financial bill and not as a money bill. This is far too transformational and important legislation that one House of Parliament should just speak on it and the other will vote. We want that both Houses should debate and vote on it," he said.

Accusing the government of bringing GST to favour the

corporates, Chidambaram said his party Congress had to speak for the common people, who were the "third factor" besides the Centre and states, that would be affected by taxes.

Thus the rate of 18 pc tax was the most acceptable given the economic situation of the country, he said.

"In the name of people, ... Standard rate should be capped at 18 per cent," the Congress leader said, adding he does not buy the argument that by keeping the rate at 18 per cent, the states will lose revenue.

"Let me go on record that it is hugely inflationary and will lead to a backlash if you jack up the Service Tax rate from the current 14.5 per cent to around 23 or 24 per cent," he said.

Chidambaram said indirect taxes, being regressive in nature, are kept at minimum the world over and it ranges from 14.1 per cent in emerging economies like India to a maximum of 16.8 per cent in developed countries.

The former Finance Minister said the rate of tax must be changed by the approval of Parliament and not by the Executive.

"When we say cap the taxe rate, we are saying that it cannot be changed by the whims of the Executive. A rate must only be changed by Parliament approval. It cannot and ought not be changed at the whims of the executive. People of India want lower tax rate," he said.

Earlier Jaitley said the bill is guided by two main principles that rate of tax should gradually come down so that it is more citizen-friendly and also that tax should be adequate enough so as to generate enough revenue to states.

Naresh Agrawal of Samajwadi Party said despite not

wanting, his party is supporting the Bill because they do not want to be blamed for being an obstruction in the country's progress.

Taking a dig at the NDA, he said it was their "smartness" that every time they bring out a Bill, the feeling given out was as if they are going to bring about a huge turnaround in the country.

"But what happened to your old Bills. What about black money," Agrawal asked.

Alleging that the government's intention is "bad" and to raise taxes, he said, "You are saying that we don't want inflation in the country. Then why not set a low rate such as 18 per cent now itself?".

He also asked the government not to make the GST Bill a Money Bill.

Agrawal also said while Centre has kept two-thirds vote of states in GST council, decision is by three-fourths. "So, the Centre's veto stays," he said.

"When state GST law comes, if state imposes extra tax, say, on tobacco, will you be able to stop it? Small traders are opposing GST. We have demanded that traders with up to Rs 10 lakh turnover be excluded from GST," he said.

He also wondered if GST of food products will also be there, which in turn will lead to price rise.

Navaneetha Krishnan (AIADMK) opposed the Bill, saying "This constitutional amendment Bill is not valid. It violates the states' fiscal autonomy. It will give permanent revenue loss to Tamil Nadu. We oppose it."

Noting that federalism is the basic feature of constitution, he said the Bill violates federalism.

"It also violates Article 21 of the Constitution. This Parliament has no competence to bring this Bill violative of federalism," he said.

Arguing that Tamil Nadu is a manufacturing state, he said the state will lose substantial revenue.

"GST method of levying tax is destination-based, not origin-based. So we strongly oppose it. We will lose Rs 9,270 crore. This is not a small loss. Even after 5 years, centre should compensate states for any loss," he said.

Jaitley also said that a uniform tax rate will bring about

seamless transfer of goods and services across country and it will help enable check its evasion.

The Finance Minister said GST Bill will empower the states and will increase revenue of states as well as the Centre. It will also help make some products cost less, he said.

There will be three enabling laws to bring about the GST regime - two by the Parliament and one by the state legislatures, he said.

He said as a part of consensus, states felt that consumable alcohol had to be kept out.

The Finance Minister said the concept of GST Council is Indian federalism at play and two-thirds of voting power in the council belongs to the states.

Jaitley said the Empowered Committee of State Finance Minister was consulted from time to time as one of the contentious issues was to bring on board states which had reservations.

Chidambaram said, "This is far too important legislation which will impact the next 50-100 years."

The former Finance Minister said if government is not putting the 18 per cent cap on tax rate in the Constitution bill, it must mention it when three months later it brings the GST bill here. "We will campaign that it should not exceed 18 per cent," he said.

"The heart of this Bill is the rate of tax" and that should be kept low, he added.

Stressing on the need for setting up a disputes redressal mechanism in the Council, he said, "You must oblige the GST Council to set up a dispute resolution authority, ex-ante. I am glad that some strengthening has been done to this provision. But there is still time to strengthen it. Finance Minister can do so by introducing an amendment during this debate."

Chidambaram said the dispute resolution between the Centre and a state or between two states or between a group of states is not a matter on which the Constitution is silent.

"Article 131 makes this very clear. Dispute resolution is judicial power. Time and again judges have said, if you encroach upon our judicial power we will strike it down. The draft circulated was abominally deficient," he said.

He expressed satisfaction over government agreeing to scrap the provision of one per cent levy of additional tax by states.

"How can you, in a destination-based tax, have a retrograde provision like some states being allowed to impose an additional one per cent tax? The Chief Economic Advisor pointed out that this was a retrograde provision and I am happy it was scrapped," Chidambaram added.

He also pointed out to the "clumsy" drafting of the bill but said nothing much can be done at this late stage when it is being debated upon.

He added that there is a provision on what will go or not go in the consolidated fund of India in the amendments.

"This should have been thought of earlier. Revenue must go in consolidated fund. It can't go anywhere else. The draft Bill leaves it unanswered," he said.

Recounting how the GST bill continued to be stuck due to opposition, Chidambaram, the former Finance Minister, said between 2011 and 2014 he had done was virtually a "char dham" (yatra).

"We tried to pass the GST Bill with the support of the principal Opposition party and we failed. In the past two years, the (NDA) government also tried to pass the GST Bill without the support of the principal Opposition party and I am glad you also failed," he said.

The Congress leader had words of praise for Jaitley, saying, "I welcome the friendly and conciliatory tone of the Finance Minister's speech."

Derek O'Brien (Trinamool Congress), while supporting the Bill, took pot shots at both Congress and the BJP.

"They (BJP and Congress) would have won the Olympic medal for ping pong with the way these two parties have played with the GST for the last 10 years," he said.

"GST could also be interpreted as 'Girgit Samjhota Tax'," he said.

Quoting various remarks by both parties, he said, "What they say depends on where they sit... In 2011, Gujarat Finance Minister opposed GST calling it retrograde. "

Referring to Chidambaram, O'Brien said the policy of his Congress colleagues was "go slow tactics (GST)".

He said it should be ensured that GST is implemented from April 1, 2017. "This ping-pong match cannot go on forever."

Sharad Yadav of JD(U) supported the Bill and said he was also instrumental in getting a consensus.

He said corruption increases with many tax laws and the GST will help reduce it.