Rajya Sabha passes GST Constitutional Amendment Bill

In the biggest tax reform since Independence and after multiple failed attempts, the Goods & Services Tax (GST) finally had its historic day in the Rajya Sabha with the passage of the Bill to amend the Constitution, which aims to do away with multiple rates of taxation at each state’s level and to replace those with a uniform rate nationwide. The legislation after a seven-hour debate was approved by the Rajya Sabha with 203 votes in favour and none against, in the 243-member House. The exact rate of the tax will only be decided in the weeks or months ahead.

The proposed GST would include various central (Excise Duty, Additional Excise Duty, service tax, Countervailing or Additional Customs Duty, Special Additional Duty of Customs, etc.), as well as state-level indirect taxes (VAT/sales tax, purchase tax, entertainment tax, luxury tax, octroi, entry tax, etc). Once the Bill is passed, there will only be a national-level central GST and a state-level GST spanning the entire value chain for all goods and services, with some exemptions.

Now, the 122 Constitution Amendment Bill, 2014, as passed by the Rajya Sabha, will first go to the Lok Sabha again, since the bill that had been passed by the lower house on May 6, 2015, underwent amendments to reach a political consensus. Later, as it is a Constitution amendment that involves the states, at least 50 percent of them also have to ratify it and finally presidential consent after which the amendment will take effect. Apart from this part, the parliament will have to pass relevant bills for a Central GST and an integrated GST, while the states will have to enact their own legislations for a State GST.

Finance Minister Arun Jaitley has said that the GST rate will be kept as low as possible, "We will also try and keep the rate as low as possible, certainly much lower than what the present situation is. And as compliance increases, the possibility of that rate coming down further would be there." He added that GST will make the system more efficient, increase tax compliance and tax avoidance will become more difficult as it will be detected at some stage or the other. Also, there will be no cascading effect of tax on tax; he said adding there are certain items which will either attract lower rate of tax or no tax at all.