Cabinet clears GST Bill

Sanjeev Sharma

Tribune News Service

New Delhi, December 17

The Cabinet today cleared the Constitution Amendment Bill on Goods and Services Tax (GST), paving the way for its introduction in the current session of Parliament which concludes next week.

The Modi government was keen that the legislation should at least be introduced in the ongoing winter session of Parliament.

The government aims at rolling out the goods and services tax from April 1, 2016. Sources said the Cabinet cleared the Bill after a compromise was reached with the states on contentious issues such as petroleum products, entry tax and compensation.

The GST delayed for seven years now as the states were not amenable to the proposal fearing loss of revenue. State governments collect a substantial portion of their revenues from local taxes, which are over and above the VAT rate. Some state governments have expressed concern that manufacturing states will lose out to consumption-driven states as GST is a destination-based tax. It was agreed that the entry tax will be included in the GST Bill and in lieu of that the states can charge an additional tax of 1% on any other items. As a compromise, the petroleum products will continue as status quo and a decision will be taken later depending on the crude prices and other factors.

The Centre will provide Rs11,000 crore as compensation to the states this year to clear the dues. In case of loss to the states, the Centre will provide 100% compensation for the first three years, 75% in the fourth year and 50% in the fifth. The operational details and the rates will be decided by the GST Council comprising the Centre and the states.