GST bill: Cabinet clears key amendments to push reform through Parliament

NEW DELHI: The Union cabinet on Wednesday approved key changes to the constitution amendment bill for goods and services tax (GST), doing away with a 1% additional levy on supply of goods, and proposing full compensation to states for five years for revenue loss arising from transition to GST.

The changes pave the way for the bill to be tabled in the Rajya Sabha, where the numbers, while not completely in favour of the National Democratic Alliance, are more favourable than they have been in over two years.

The GST rate won’t be capped at 18%, the rate proposed by a panel led by chief economic adviser Arvind Subramanian. Disputes will be decided on the basis of a mechanism devised by the GST Council and not by a dispute resolution panel.

Both these, and doing away with the proposed 1% additional levy, were key demands of the Congress, which had insisted they be met if it was to back the legislation.

“The cabinet met and discussed the amendments to the 122nd constitution amendment bill. It has been decided to do away with the 1% tax,” said a minister who did not want to be identified.

The changes are in line with the recommendations of a select committee of Parliament and have received states’ backing.

Passage of the GST bill in the ongoing monsoon session will be crucial for the government to meet the 1 April 2017 deadline for roll-out of the tax that aims to unify this country into a single market by removing inter-state barriers to trade in goods and services. Experts say that the bill could increase gross domestic product (GDP) by as much as two percentage points.

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