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.
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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.