Cabinet to take up GST Constitution Amendment Bill tomorrow

New Delhi, Mar 14 (PTI) The Union Cabinet is likely to tomorrow consider a Constitution Amendment Bill to pave the way for implementation of Goods and Services Tax, a new indirect tax regime that will subsume various levies like excise and service tax. According to sources, Cabinet will consider the GST Constitution Amendment Bill tomorrow. After that, it will be introduced in the current session of Parliament. The Finance Ministry has worked on the final draft Amendment Bill - the fourth since the discussions on the new tax regime started. Earlier, the first three drafts prepared by the Centre were rejected by the states, citing autonomy issues. The fourth draft, a hybrid of the second and third draft, has proposed that the GST council for taking decisions on all important matters will be formed through a presidential order. In addition, the composition of the GST Dispute Resolution Authority, proposed to be a part of the Constitution Amendment, will be decided by Parliament. Furthermore, petroleum, natural gas, diesel and ATF have been kept out of the GST ambit in the final draft. Last year, a draft Constitution Bill proposed by the Centre to the states had suggested a council chaired by the Union Finance Minister, with states as members, to make changes in GST. The states, especially NDA-ruled ones, had raised objections to the proposal, saying it would give veto power to the Union Finance Minister over state taxation issues. The Centre subsequently provided another draft to states, suggesting that changes in GST could be made only if there was a consensus on those issues in the council. However, some state finance ministers did not agree to even this suggestion. Taking into consideration the states'' concerns, the Finance Ministry had floated a third draft on the GST Constitution Amendment Bill. The new draft proposed to create a GST Council through an Act of Parliament, instead of a presidential order, as proposed in the previous draft. The Centre had also dropped any reference to the Union Finance Minister heading the GST Council. After missing the original April, 2010, deadline for GST rollout, the government proposed to introduce it in April, 2011. But it is all set to miss this deadline too. According to Revenue Secretary Sunil Mitra, it may be difficult to implement GST from April 1, 2012, too. The GST will subsume indirect taxes like excise duty and service tax at the central level and VAT on the states front, besides local levies.

Govt moves Constitution Amendment Bill for GST

Bs Reporter / New Delhi March 23, 2011, 0:41 IST

The government on Tuesday inched a step closer to the introduction of the Goods and Services Tax (GST) by tabling a Constitution Amendment Bill in Parliament that seeks to provide powers to the Centre and states to make laws for levying tax on supply of goods and services. Now, states are not allowed to tax services, while the Centre cannot tax sale of goods. GST would replace a number of indirect taxes levied by the Centre and state governments, and was intended to remove cascading of taxes and provide a common national market for goods and services, said the Constitution (One Hundred and Fifteenth Amendment) Bill, 2011.

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GST will subsume many taxes levied at the Centre, including excise duty, additional excise duties, excise duty levied under the Medicinal and Toilet Preparations (Excise Duties) Act, 1955, service tax, additional customs duty, special additional duty, central surcharges and cesses (excluding those applicable to income tax). At the state level, it will subsume state value added tax/sales tax, entertainment tax (unless levied by local bodies), luxury tax, taxes on lottery, betting and gambling, tax on advertisements, state cesses and surcharges and entry tax, not levied by local bodies.

MAIN POINTS
CONSTITUTION (115th AMENDMENT) BILL PROPOSES...

* Simultaneous power to be conferred upon Parliament and state legislatures to make laws on GST * President to constitute a GST Council to be headed by finance minister with members from states * Council to make recommendations the taxes to be levied, goods to be exempted, GST rate * Establishment of a GST Dispute Settlement Authority to adjudicate any dispute or complaint
It proposes to keep crude petroleum, diesel, petrol, aviation turbine fuel, natural gas and alcohol for human consumption outside the purview of GST. States will be allowed to levy tax on inter-state movement of these goods.

GST Bill a sub-optimal outcome

Satya Poddar / March 23, 2011, 0:45 IST

The tabling of the Constitution (Amendment) Bill in Parliament is a step forward in the Governments agenda for implementation of the Goods and Services Tax (GST). However, the GST model conceived in the Bill isnt the one industry was clamouring for. It is not the flawless GST the 13th Finance Commission had recommended. It is a Bill on which several Cabinet ministers had expressed concerns. The Planning Commission also had significant reservations. However, the finance minister is in a hurry and does not want to lose any more time. He recognises flaws in the GST model proposed in the Bill, but has not been successful in persuading the Empowered Committee of State Finance Ministers (ECSFM) to look beyond their self interests. In many ways, the model is contrary to the interests of individual states. This is a clear case of revenue-maximising behaviour of individual states leading to a sub-optimal outcome for the group as a whole. Many states admit the outcome is unappetising and sure to cause indigestion.
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The main flaw of the Bill is that it excludes important sectors from the GST ambit. Sectors such as petroleum, natural gas, real estate and alcohol are proposed to be kept outside the GST domain. Even for electricity, while the Bill is silent, indications are that it would also be kept outside the GST scope. The States have indicated theyd continue to levy electricity duty, which would preclude application of GST. Keeping the core sectors out of the GST domain would have serious implications for the industry. These sectors are the foundation of all commercial and industrial activity and their exclusion would result in considerable cascading of taxes. The cascading in petroleum sector alone is estimated to be Rs 35,000 crore per annum! Since the exclusion is provided in the Constitution itself, it precludes any future move to include them into GST. Exclusion of these sectors serves no social, economic or fiscal policy objectives.

The second major flaw is that certain distortionary taxes such as the entry tax and octroi, and the entertainment tax, would be kept alive to the extent levied and collected by a panchayat or municipality. Continuation of these levies outside the GST would perpetuate problems in the existing structure and be a hurdle in attaining the simplicity and efficiency that GST seeks to achieve. Flawed strategy Where did things go wrong? Perhaps the Government aimed too high in asking for a uniform GST in all states. Ideally, the Constitution should have been amended only to empower the Centre and the States to levy GST in a comprehensive manner on all supplies, including real property. Any exclusions from the base should have been left to be dealt with in the GST legislation. Further, rather than asking all states to follow a common model, the Government could have created a comprehensive model, allowing states to opt in, as under the Canadian model. Given the state of affairs, the tabling of the Bill in Parliament, to be referred to a Standing Committee thereafter, is a significant development in that it would allow a fresh opportunity to carry forward the GST discussions. The ECSFM forum has not allowed meaningful discussions and completely ignored the industrys views, making the consultative process lopsided. It is strange that the Empowered Committee did not see fit to allow any industry group to make a presentation on the subject. Never before has there been such a clamour for a comprehensive GST to be introduced. A good reform has been hamstrung not because of taxpayers, but because of the narrow vision of governments. The industry and the government have now pinned their hopes on the parliamentary committee to salvage the GST. (The writer is tax partner, Ernst & Young. The views are personal)

Govt introduces Constitution Bill in Lok Sabha for GST

Press Trust of India / New Delhi March 22, 2011, 11:09 IST

The government today introduced a Constitution Amendment Bill in the Lok Sabha to facilitate implementation of the Goods and Service Tax (GST), an indirect tax regime that would subsume levies like excise, service tax and sales tax. The Bill, introduced by Finance Minister Pranab Mukherjee seeks to amend the constitution with a view to confer simultaneous powers on centre and states to levy taxes on goods and services.
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"The GST would replace a number of indirect taxes presently being levied by the central government and the state governments and is intended to remove cascading of taxes and provide a common national market for goods and services," said the statement of objects and reasons of the Bill. The Bill provides for creation of a GST Council to be headed by Union Finance Minister. The Council will be empowered to recommend tax rates and exemption and threshold limits for good and services. Besides, the Bill proposed a GST Dispute Settlement Authority to deal with grievances of the centre and the state with regard to GST. The GST, which is considered to be a major tax reform, has been pending for the last four years due to

GST Constitution Amendment Bill OK'd

differences between centre and some states over the structure of the new tax regime. Agencies Posted: Tuesday, Mar 15, 2011 at 1731 hrs IST Tags: Constitution Amendment Bill Approved | Union Cabinet | Goods And Services Tax Implementation | GST | Indirect Tax Regime

New Delhi: The Union Cabinet today approved Constitution Amendment Bill to pave the way for implementation of Goods and Services Tax, a new indirect tax regime that will subsume various levies such as excise and service tax. According to sources, the Cabinet has cleared the Bill but there are certain changes which the Law Ministry has been asked to do. Now, the government would push to table it in Parliament. "It has been approved. We will try to introduce it in Parliament," a minister said. The Finance Ministry has worked on the final draft Amendment Bill, the fourth since the discussions on the new tax regime started. Earlier, the first three drafts prepared by the Centre were rejected by the states citing autonomy issues. The fourth draft, a hybrid of the second and third draft, has proposed that the GST council for taking decisions on all important matters will be formed through a presidential order. In addition, the composition of the GST Dispute Resolution Authority, proposed to be a part of the Constitution Amendment, will be decided by Parliament. Furthermore, petroleum, natural gas, diesel and ATF have been kept out of the GST ambit in the final draft. Last year, a draft Constitution Bill proposed by the Centre to the states had suggested a council chaired by the Union Finance Minister, with states as members, to make changes in GST.

The states, especially NDA-ruled ones, had raised objections to the proposal, saying it would give veto power to the Union Finance Minister over state taxation issues. The Centre subsequently provided another draft to states, suggesting that changes in GST could be made only if there was a consensus on those issues in the council. However, some state finance ministers did not agree to even this suggestion. Taking into consideration the states' concerns, the Finance Ministry had floated a third draft on the GST Constitution Amendment Bill. The new draft proposed to create a GST Council through an Act of Parliament, instead of a presidential order, as proposed in the previous draft. The Centre had also dropped any reference to the Union Finance Minister heading the GST Council. After missing the original April, 2010 deadline for GST rollout, the government proposed to introduce it in April, 2011. But it is all set to miss this deadline too. According to Revenue Secretary Sunil Mitra, it may be difficult to implement GST from April 1, 2012, too. The GST will subsume indirect taxes such as excise duty and service tax at the central level and VAT on the states front, besides local levies.

Cabinet clears GST Constitution Amendment Bill

PTI | 03:03 PM,Mar 15,2011

New Delhi, Mar 15 (PTI) The Union Cabinet today approved Constitution Amendment Bill to pave the way for implementation of Goods and Services Tax, a new indirect tax regime that will subsume various levies such as excise and service tax. According to sources, the Cabinet has cleared the Bill but there are certain changes which the Law Ministry has been asked to do. Now, the government would push to table it in Parliament. "It has been approved. We will try to introduce it in Parliament," a minister said. The Finance Ministry has worked on the final draft Amendment Bill, the fourth since the discussions on the new tax regime started. Earlier, the first three drafts prepared by the Centre were rejected by the states citing autonomy issues. The fourth draft, a hybrid of the second and third draft, has proposed that the GST council for taking decisions on all important matters will be formed through a presidential order. In addition, the composition of the GST Dispute Resolution Authority, proposed to be a part of the Constitution Amendment, will be decided by Parliament. Furthermore, petroleum, natural gas, diesel and ATF have been kept out of the GST ambit in the final draft. Last year, a draft Constitution Bill proposed by the Centre to the states had suggested a council chaired by the Union Finance Minister, with states as members, to make changes in GST. The states, especially NDA-ruled ones, had raised objections to the proposal, saying it would give veto power to the Union Finance Minister over state taxation issues. The Centre subsequently provided another draft to states, suggesting that changes in GST could be made only if there was a consensus on those issues in the council. However, some state finance ministers did not agree to even this suggestion. Taking into consideration the states' concerns, the Finance Ministry had floated a third draft on the GST Constitution Amendment Bill. The new draft proposed to create a GST Council through an Act of Parliament, instead of a presidential order, as proposed in the previous draft. The Centre had also dropped any reference to the Union Finance Minister heading the GST Council. After missing the original April, 2010 deadline for GST rollout, the government proposed to introduce it in April, 2011. But it is all set to miss this deadline too. According to Revenue Secretary Sunil Mitra, it may be difficult to implement GST from April 1, 2012, too. The GST will subsume indirect

taxes such as excise duty and service tax at the central level and VAT on the states front, besides local levies.

GST net: Alcohol out, but print media in; petroleum products too excluded New Delhi, March 22: The Finance Minister, Mr Pranab Mukherjee, has decided to specifically exclude alcohol (for human consumption only) from the GST net, but include print media in it. He also wanted natural gas, diesel, petrol, crude oil and Aviation Turbine Fuel (ATF) to be excluded. These proposals are contained in the Constitutional (115th Amendment) Bill 2011 that seeks to facilitate dual Goods and Services Tax (GST) system. This Bill was introduced by Mr Mukherjee in Lok Sabha on Tuesday. By specifically mentioning the exclusion or inclusion of these items under the GST net at the level of the Constitutional Amendment Bill itself, the Centre seeks to ensure that the proposed Goods and Service Tax Council (GST Council) would not have any room to make recommendations on these items, say Constitutional and tax experts. With tobacco and tobacco products not specifically excluded from the GST net at the Constitutional amendment Bill level, there is a possibility of GST being levied on these items, according to tax experts. The Constitutional amendment Bill retains tobacco and tobacco products in the Union List for excise duty purposes. The specific exclusion of natural gas, petrol, high speed diesel, crude petrol, alcohol for human consumption and ATF from GST will come as good news for most States as they want to retain fiscal autonomy over these items through levy of sales tax and State-level excise duty (alcohol). This may, however, not be to the liking of the industry which wanted crude and petroleum products to come under the GST net. Meanwhile, the passage of the Constitutional amendment Bill may not be all that difficult given that the Centre has climbed down on most of the contentious proposals relating to the GST council and also on the GST Settlement Authority. Putting to rest concerns that Union Finance Minister will have veto power on GST rates, the Constitutional Amendment Bill states that every decision of the GST council taken at a meeting shall be with the consensus of all the members present at the meeting. The GST Council will be set up through a Presidential order and the Union Finance Minister will be the Chairperson. Besides the Minister of State for Finance in charge of revenue, the other members of the Council are the Minister in charge of Finance or taxation or any other minister nominated by each State Government.

GST in Parliament: Now, will it be rolled out in April '12?

Published on Tue, Mar 22, 2011 at 21:21 | Updated at Wed, Mar 23, 2011 at 10:41 | Source : CNBC-TV18

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In the first step to the roll-out of the country's largest indirect tax reform, the constitutional amendment bill for Goods and Services Tax (GST) was tabled in Parliament today. The Bill was tabled despite opposition, mainly from BJP-ruled states, and is now, likely to be referred to the Parliamentary Standing Committee for scrutiny. In an interview with CNBC-TV18s Siddharth Zarabi, Satya Poddar, Ernst & Young, discusses the impact of the move. Here is a verbatim transcript of the exclusive interview with Satya Poddar on CNBC-TV18. Also watch the accompanying video.

Excerpts from What's Hot on CNBC-TV18 Watch the full show

Q: Despite the GST constitutional amendment finally being tabled in the Parliament today, do you expect the tax to be rolled out from April 2012 or even perhaps June 2012? A: June is more realistic than April. A lot will depend upon how speedily Parliamentary Committee sends its recommendations to Parliament. Expectation is that the Bill will be referred to the Standing Committee of Parliament chaired by Mr Yashwant Sinha and the earliest they will report back is October. If they can report back to Parliament by October then there is a realistic chance of the GST law to be enacted by June 2012. But not before that. Q: One of the concerns that is emerging and this has to do with the politics of the situation at the Center and in Parliament specifically. It is clear that political relationships between the ruling party and the leading opposition have taken a turn for the worse. It was perhaps unprecedented in recent years that the principal opposition walks out during a debate on the Finance Bill. Given this background and the acrimony, do you seriously expect that the Standing Committee, which is headed by BJP MP, would sort of be willing to except and go ahead with what the

government is proposing, especially given the concern among BJP states about the loss of financial autonomy? A: Things have really unfolded in almost completely unpredictable manner over the past few months. It will be futile and sort of presumptive for me to speculate how they unfold over the next few months. Good news is that the BJP party, particularly the leadership at the national level has been supportive of the GST. Infact it was one of the items in their political manifesto in the last elections to introduce the GST. So, there their opposition is muted. The business community almost unanimously wants GST. BJP is not likely to ignore those desires of the business community. It is good for the tax payers, good for the economy. But at the same time, politically they may well decide to not cooperate with the government, but only time will tell how the debate unfolds. Q: We are now talking about the specifics of the amendment as has been introduced in Parliament. Now the key feature is that it proposes the setting up of a council with various features, powers etc. But the key thing is that this will only be recommendatory in nature, unlike in the past as was suggested, the GST council will not have sort of a decisive final say on this matter. So, how will therefore rate discipline be maintained? Clearly that is the biggest fear. You cannot have one particular state sort of going unilaterally on its own path, abjuring the consensus. So, now if the council is only recommendatory, how much of a fear does a tax expert like you have on that front? A: I believe that once the GST is implemented, and it is implemented, according to the model law, which is meant to be uniform across the states, then the things will not be as disruptive as governments fear today or the politicians fear today. The model law will specify uniform base across the states. There will be a dispute sort of settlement authority in case the states deviate from the common rates structure. And that rates structure does lead to some losses in revenues to other states, then the disputes of settlement authority will have the power to intervene. So, my own sense is that those things are not worrisome as long as the GST is launched in a uniform manner across the states. And the very fact that the settlement authority will be there, that will act as enough of a deterrent for the states to deviate from the model.

Q: By leaving out items like petroleum, alcohol from the GST net, what are we really doing with this? Clearly, the effect of cascading taxes and all this sort of multiple levies that we have, that is not going to go away with GST. So, why even have it? A: Absolutely right. In fact this is the biggest flaw of what has been tabled in Parliament. In my view, the constitutional provision could have only dealt with empowerment of the two levels of the governments, Central and the states to levy the GST tax. And anything to be left out, could have been discussed in the context of the GST legislation. But to enshrine that

exclusion of certain sectors in the constitution makes the constitutional provision flawed and the eventual GST will obviously be flawed. And the sectors, which are left out, are so fundamental, the amount of cascading they will perpetuate is not trivial. In fact all of the gains from the GST would be nullified, if all these sectors are left out. If petroleum, natural gas, electricity, alcohol, these are not trivial sectors, and the real property. So, if you leave out these six-seven sectors, half of the economy is outside the GST net. So, what is the point of it all? So, I do hope that the Parliamentary Committee will take a serious look at the constitutional provisions and hopefully recommends significant changes in the constitutional bills. So, these excluded sectors are put back in the constitution, within the scope of the GST

FM moves GST bill in LS despite lack of consensus

TNN, Mar 23, 2011, 03.16am IST Tags:

Pranab Mukherjee

NEW DELHI: Finance minister Pranab Mukherjee on Tuesday set the stage for the introduction of the Goods and Services Tax (GST)the most ambitious tax reform proposal in recent years even as several states said that common ground was yet to be reached. The indirect tax reforms are aimed at streamlining the movement of goods across India with a single tax structure by abolishing the current multiple tax system comprising central excise, state VAT and service tax, which add up to over 30%. The GST was scheduled to be introduced from April 2010. However, the Centre failed to build a consensus with Opposition-ruled states.

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The GST will not cover petroleum products and alcohol but will allow the Centre to levy taxes on supply of goods in inter-state trade. In case of all other goods and services, there will be separate levies for the Centre and the states, which together would add up to 16%. Mukherjee moved a Constitution Amendment Bill in Lok Sabha, which among other things, provides for the constitution of a GST Council consisting of the finance minister as chairman, and a vice-chairman to be elected from among the FMs of states, who will be members of the council. The Union minister of state for revenue will also be a member of the council.

UPA gets moving on reforms

New Bills will allow amendment to the Constitution to pave way for GST, banking and pension reforms
Sanjiv Shankaran & Liz Mathew

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New Delhi: Finance minister Pranab Mukherjee on Tuesday pushed ahead with the United Progressive Alliance (UPA) governments economic reforms agenda by introducing new legislation on banking and indirect tax even though the government is under pressure in Parliament on account of political controversies. Legislation to reform banking and a Bill to amend the Constitution to facilitate goods and services tax (GST) were introduced in the Lok Sabha on Tuesday, both budget promises. They will be followed by more Bills to reform pension and bring some more areas of banking and financial services in line with requirements, the minister said in the Lok Sabha.

The developments came in the wake of the UPA being subject to pressure in Parliament on account of recent political controversies, which could make it more challenging for the government to drum up support for the legislation. The UPA, which could not transact any major legislative business during the winter session due to a belligerent opposition, has had to cut short the budget session. Both Houses of Parliament are to be adjourned until further notice on 25 March. The budget session was initially scheduled to go for a three-week recess on 16 March before reconvening from 4-21 April. The confidence really stems from the fact that the national interest is above politics, said Manish Tewari, Congress party spokesperson. It is important to harmonize your tariff regime with the global tariff. These are issues above politics. I hope the opposition would heed this imperative and will not hold it ransom to partisan politics.

The government has to show determination, said Balveer Arora, former head of the political science department at Jawaharlal Nehru University, on the UPAs decision to press ahead with economic reforms. It cannot be seen as lacking will and determination, especially at a time it is gearing up to crucial state elections, he said. But (whether) the firmness and the will it shows will yield results has to be seen.

The banking reforms Bill was introduced almost six years after the UPA unsuccessfully tried to push it through Parliament in its first stint in power from 2004-09. The highlights of Tuesdays banking Bill are that it arms the Reserve Bank of India (RBI) with the extra powers it wants to allow industrial groups to float banks (Mint, 3 March). The Bill gives RBI the power to supersede a banks governing board for up to a year, ask for financial and other details from associate companies of banks, and also insulates the banking sector from the provisions of the Competition Act and the Competition Commission of India. RBIs absolute powers over banks has been insulated from any other legislation or regulator. Other than empowering RBI to deal with an expansion of the banking industry, Tuesdays Bill also allows banks to issue more instruments to raise capital and brings voting rights in private banks in line with shareholding. In nationalized banks, the maximum permissible voting rights have been enhanced to 10% from the current ceiling of 1%. Reforms in the financial sector were supplemented by a new initiative to break the deadlock between the Centre and the states in GST negotiations. The constitutional amendment Bill on GST introduced on Tuesday proposes a flexible superstructure for GST and leaves details to be worked out at a later stage. GST aims to build a common market in India by scrapping tax barriers between states. The introduction of GST is expected to bring about a more competitive business environment and eventually lower prices for consumers. An important outcome of Tuesdays Bill on GST is that some of the people engaged in the deadlocked negotiations are bound to change. The constructive thing is the shift in the forum for debate on GST to a parliamentary standing committee from the empowered committee of state finance ministers, said Satya Poddar, partner at audit and consulting firm Ernst and Young Pvt. Ltd. The empowered committee had become dysfunctional. Ultimately, it is just tabling of the Bill. It will go to the standing committee, where a consensus could be hammered out. A lot of differences will get ironed out there, Tewari said. The GST Bill kept alcohol and petroleum derivatives such as diesel and natural gas out of the purview of GST. In addition, the Bill tried to offset states fears of losing fiscal autonomy by adding a provision that the top decision-making body would take a consensus approach. In its first draft of the Bill given to states in 2010, the Centre gave the Union finance minister special power to veto decisions of the GST council, the top decision-making body.