Industry leaders on Thursday welcomed the passage of the much-awaited GST Bill in the Rajya Sabha.
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However, this is still a huge step forward for India and for the economic reform agenda of Prime Minister Modi.
“GST is one of the critical tax reforms which has potential to create one single market in India for goods & services and will boost country’s economy significantly”, he said.
As regards the Congress demand of keeping the GST rate low at 18 per cent, Jaitley said states need revenue to carry on their own program, while the Centre would need funds to compensate the states.
Tamil Nadu’s opposition was not unexpected. Just to give an idea, GST at state level will subsume, value added tax/sales tax, entertainment tax, octroi and entry tax, purchase tax, luxury tax and taxes on lottery.
“The proposed tax is expected to drive overall consumer demand since the cost for the logistics and supply chain inventory will be curtailed by nearly 30-40 percent, the benefits of which are expected to be passed on to the consumers”. Tamil Nadu has one of the biggest manufacturing bases in the country.
But losing out on revenues was not the only reason that Amma dissented.
Meanwhile, SIAM has requested to ensure that no additional tax be charged after the introduction of GST.
In a memorandum to Modi earlier this year, Jayalalithaa explained her position. Instead of goods being taxed multiple times at different rates, under the new GST regime goods would be taxed at the point of consumption.
“GST is also likely to make goods cheaper for consumers, increase competitiveness of Indian exports in worldwide markets and boost India’s GDP growth by 2 per cent. This far-reaching reform places India at the cross-roads of an incredible economic opportunity”, he added.
In deciding the GST rate, “we are guided by two factors – 27 per cent is too high, it is inflationary, it costs the people, so it should come down… the second they said we will collect what is essential for our present revenue requirement”, he said.
Lawmakers voted late Wednesday in favour of introducing the long-awaited Goods and Services Tax (GST), which will replace a patchwork of central and state levies on goods and services and marks India’s most significant economic reform in decades. An IT network is also to be erected for which a non-profit, non-government company has been set up called Goods and Services Tax Network that will formulate the front-end and back-end modules – the deadline is 2016-end.
In addition, there are certain areas which will still be subject to state-by-state sales duties – critically, duties on petroleum products and on alcoholic beverages.
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While other legislative and technical hurdles remain, such as ratification by at least 50% of the state assemblies, the constitutional amendment bill’s passage through the upper house removes a key impediment to implementation, and we could see the tax’s enactment by the next fiscal year (April 2017 to March 2018).
