New Delhi: The Goods and Services Tax (GST) bill was passed unanimously by a 443-0 vote in the Lok Sabha on Monday, with only the AIADMK staging a walkout.
Expressing gratitude to all parties for support, Prime Minister Narendra Modi described GST as a “crucial step” towards ending tax terrorism besides reducing corruption and black money and said the new regime of indirect taxation will make the consumer the “king”.
He emphasised in Lok Sabha that the passage of the GST Constitution Amendment Bill by Parliament was not a victory of any party or government but was everybody’s victory as it highlighted the success of the democratic ethos of the country.
Intervening in a debate on Constitution (122nd Amendment) Bill, Modi asserted that the GST will benefit mainly those states which are considered backwards and address the problem of imbalanced development.
He acknowledged that manufacturing states will suffer losses but said they will be compensated.
“August 8th marks a crucial step towards freedom from tax terrorism,” the Prime Minister said while recalling that this was the day in 1942 when Mahatma Gandhi had sounded the bugle of ‘Quit India’ which marked a major step towards the country’s Independence.
“GST can’t be seen as a victory for a party or government. It is the victory for a democratic ethos of India and a victory for everyone,” he said while noting that the measure was being supported by all parties, irrespective of different ideologies. The Prime Minister said the new indirect taxation regime, which will subsume 7-13 taxes, will help end corruption as traders will be compelled to give proper bills and the consumer will be the “king”.
It will also help reduce the problem of black money and lead to the generation of jobs by benefitting the small traders and entrepreneurs, he said.
Noting that the GST bill had been firmed up after thorough “churning of ideas”, Modi “humbly” expressed happiness that it was being passed through an unprecedented consensus of parties.
He said he had held consultations with his predecessor Manmohan Singh and Congress president Sonia Gandhi on the issue.
“Rashtra Niti (national policy) is above ‘Raj Niti’ (politics)….I thank all political parties, as also state governments run by different parties. We are taking such a decision.. we have reached here after churning in Lok Sabha, Rajya Sabha, 29 states, their representatives and 90 parties. We are putting a stamp on the final decision,” Modi said.
Underlining that the development marks the “recognition of One India” and strengthens this concept, he said, “We are aligning ourselves with new taxation regime…. GST is a new ‘motion’ (bead) in this ‘maala’ (necklace).”
He coined the GST in a new manner — ‘Great Step by Team India’, ‘Great Step towards Transformation’, ‘Great Step towards Transparency’.
Responding to Congress’ contention that GST was its idea being implemented by the NDA government, he acknowledged that all political parties and previous governments had contributed to making of the bill.
In this context, he quipped, “janam koi de, lalan palan koi kare. Krishna ko janam kisne diya, bada kisne kiya? (somebody may give birth, but someone else may nurture. Who gave birth to Lord Krishna and who brought him up?)”
At the same time, he said, “we do not have ‘guroor’ (arrogance) that his bill is the perfect one” even though ” so many brains have made an effort which will have results”.
Earlier in the day, Finance Minister Arun Jaitley said that majority of political parties have backed the legislation. “Centre has addressed concerns of all states on GST,” said Jaitley in Lok Sabha while moving the Constitution Amendment Bill.
“GST will ensure one tax in the entire country. It will result in a seamless transfer of goods and services in the country…This is a major indirect tax reform which will in long run will be in the interest of the country,” he said, adding Centre has addressed concerns of all the states.
As regards the issue of states giving up sovereign power to levy taxes, the minister said it is not the case, “states and the Centre will be pooling in their sovereignty together and creating a new mechanism which will take all its decision within that pooled sovereignty.”
Appreciating political parties for showing unanimity in passing the bill in the Upper House, he said, “it is an important legislation and divided Parliament passing the country would not benefit the country.”
The Minister further said the new tax regime will “check leakages, increase the tax base for centre and states, eliminate the cascading effect of the tax on tax, reduce tax evasion and improve ease of doing business.”
Jaitley, while moving the amendments to the GST bill cleared last week by the Rajya Sabha, said the Constitutional Amendment Bill is an enabling law. After it is approved by the state assemblies, three more laws– Central GST, Integrated GST and State GST– will be drafted by the GST Council.
While the CGST and IGST will have to pass by Parliament, states will have to pass their SGST law. “Simultaneously the GST Council will work on the functional modalities for implementation such that same person is not assessed by both Centre and states,” Jaitley said.
He said it was the strength of the democracy that the states and opposition parties came on board for passage of the indirect tax reform bill. “Majority of the political parties have come forward in support of the bill. Since it will be implemented by both the Centre and states, it was necessary to build a consensus on it,” the Finance Minister said.
Responding, Congress leader Veerappa Moily said that the bill ‘is not flawless, but has our support’. “(It is) too early to say whether GST is a game-changer. Gains will depend on architecture, engineering, management aspects of the new levy,” he added.
“If there was political consensus, this law would’ve come into force long ago. But this House is being treated like a junior party. The Rajya Sabha is given more importance. But we support the bill,” Moily said.
Warning of the challenges ahead, the Congress leader indicated that the stakeholders’ reaction to the bill has to be carefully tackled by the GST Council. He said the Council would also have to allay the concerns of states and Union Territories.
GST, the biggest economic reform since 1991, is likely to sail through smoothly in the Lower House. It will replace a raft of different state and local taxes with a single unified value-added tax system to turn the country into world’s biggest single market.
The Bill was passed by Lok Sabha last year and now it has to go back to the Lower House for incorporating the amendments approved by Rajya Sabha.
The GST Bill has to be ratified by at least 16 states in 30 days after it is passed by Parliament.
After facing fierce opposition over the Bill for almost a year, the government succeeded in bringing all major opposition parties, including Congress, on board and it was passed in the Upper House with an overwhelming majority on August 3.
The Constitution (122nd Amendment) Bill, 2014, that would lay the ground for roll out of GST regime, was passed by the opposition-dominated Upper House after the government moved four amendments.
Once implemented, GST will subsume various taxes, including excise, services tax, octroi and other levies, and the proceeds will be shared between the Centre and the states.
Under the new GST, regime goods would be taxed at the point of consumption, instead of the goods being taxed multiple times at different rates.
The GST, which was first proposed a decade back, is seen as potentially transformative for India’s economy, adding as much as 2 percentage points to the GDP while also improving the ease of doing business and encourage investment in manufacturing. It is also expected to result in greater tax compliance, boosting government revenues.