New Delhi, Dec 20, DHNS:  With almost all states onboard, the government on Friday introduced in the Lok Sabha the Goods and Services Tax (GST) Bill that seeks to gradually eliminate all other forms of indirect taxation and contribute significantly to India’s growth story.

The discussion on the most awaited indirect tax reform will take place in the Budget session, Finance Minister Arun Jaitley said, assuring states that their revenue concerns would be fully taken care of by the Centre.

“We have made sure that no state will lose a rupee of revenue. It will be a win-win situation. The bill will not have fear of the unknown,” Jaitley told a press conference.
The Centre has committed to compensate states fully for the next three years on account of any revenue loss. The compensation would be partial in the following two years.
Besides, the states would also be compensated on account of CST (Central Sales Tax) losses and the first installment would be made before March 31, 2015.

The most important indirect tax reform since independence, the GST will eliminate all other forms of indirect taxes such as excise, service tax and VAT and is expected to help in increased compliance, boost tax revenues and make exports competitive.

This will effectively mean that the tax paid by the final consumer will come down in most cases. Lower prices will help in boosting consumption. There are differences between the Centre and states on some issues with regard to the implementation of GST that includes the revenue neutral rate, and keeping petroleum and liquor out of the ambit.

“Let there be no tax on tax. If you have multiple taxation imposed, the burden and procedural complication increases. One legitimate fear is there and therefore I am not going to rush through with this, though the standing committee has cleared it and I have discussed it repeatedly and Chidambaram (former finance minister) has discussed it repeatedly,” Jaitley said.

Jaitley also said the government would give “constitutional assurance” in terms of compensating the possible losses incurred by the states.

“Additionally we will make sure, for some period, one per cent additional tax is permitted to the states and even then the consuming states are all going to benefit. Some producing states, for some period, will lose some money. In the bill itself I have provided,” the finance minister said.

Allaying fears of some states like Tamil Nadu that the Centre was trying to push through the legislation, the minister said that he was not in a “hurry” and that the he was open to suggestion “till the very last minute”.

In a letter to the prime minister on Friday, Tamil Nadu Chief Minister O Paneerselvam said that the Centre should permit the empowered committee of state finance ministers to try and evolve a broad consensus on the critical issues before enacting the Constitutional amendment bill on GST.