Rajya Sabha panel okays GST bill, suggests five-year central compensation

New Delhi: The Select Committee of the Rajya Sabha on the Goods and Services Tax Bill has advised changes in provisions relating to compensation for states and on levy of one percent additional tax by states on the inter-state supply of goods.

The suggestions were made on Wednesday as the committee submitted its report to the Rajya Sabha, the upper house of parliament. The report, which by majority endorsed almost all the GST bill provisions is, however, marked by dissent notes from the Congress, AIADMK and Left parties.

According to the committee, the provision in the bill provides that the central government 'may' compensate states for a period up to five years for any revenue loss. The report has suggested this be substituted with a commitment to compensate for five years.

In case of the provision for levying 1 percent additional tax by states to cover their losses due to abolition of local levies, owing to implementation of GST, the committee has suggested the levy should only apply to 'all forms of supply made for a consideration'.

According to the bill, when goods move from one state to another, an additional one percent tax would be levied, but the opposition said it would lead to a cascading effect.

The committee, headed by BJP leader Bhupendra Yadav, however, retained the representation of the Centre and states in the GST Council at the proposed level at one-third and two-thirds, despite demands to reduce the centre's representation to one-fourth.

"Administratively, we are taking all steps for both the Centre and states to meet the April 2016 deadline," Revenue Secretary Shaktikanta Das told reporters in New Delhi.

The union government has set the target to reform India's indirect tax regime from April next year, and had earlier proposed 100 percent compensation to states for first three years.

The GST is seen as the key to facilitate industrial growth and improve the country's business climate.

By subsuming most indirect taxes levied by the central and state governments, such as excise duty, service tax, VAT and sales tax, the new regime proposes to facilitate a common market across the country, leading to economies of scale and reducing inflation through an efficient supply chain.

The passage of the bill to become a law is a lengthy process.

Being a constitution amendment bill, passed by the Lok Sabha, it needs to be passed by the Rajya Sabha with a two-thirds majority and then be ratified by at least 15 state legislatures before being sent to the President for his assent.

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