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Liquor out of Goods and Services Tax purview, petrol in

Bill tabled in Parliament, first tranche of CST compensation in March

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The Constitution (122nd Amendment) Bill, or the Goods and Services Tax (GST) Bill, was introduced by finance minister Arun Jaitley in Lok Sabha on Friday. In accordance with the discussions that Jaitley held with the state finance ministers earlier this month, the government has kept alcoholic liquor out of the purview of GST, and even though petrol has been brought under GST, but the tax will not be applied on it until notified at later date.

The government has made the compensation provisions to the states a part of Bill, and conferred simultaneous power to Union and state legislatures to legislate on GST.

The Bill also provides for creation of a GST Council, which will be a joint forum of the Centre and the states. GST, the much awaited tax reform, will simplify and harmonise the indirect tax regime in the country. It will broaden the tax base, and result in better tax compliance due to a robust IT infrastructure.

According to the Bill, all goods and services, except alcoholic liquor for human consumption, will be brought under the purview of GST. Petroleum and petroleum products have also been constitutionally brought under GST, but they will not be subject to the levy till notified at a future date on the recommendation of the GST Council.

The present taxes levied by the states and the Centre on petroleum and petroleum products are sales tax/VAT, and excise duty, will continue to be levied in the interim period.

Jaitley said, "We have made sure that no state will lose a rupee of revenue. It will be a win-win situation. The states would be compensated on account of the central sales tax (CST). The first instalment will be released before March 31 next year." The discussion and debate on the Bill will begin in the next session of the Parliament.

The Bill makes it the Centre's responsibility to compensate states for loss of revenue arising on account of implementation of the GST for a period up to five years. A provision in this regard has been made in the Amendment Bill The compensation will be on a tapering basis: 100% for first three years, 75% in the fourth year and 50% in the fifth year.

This council would function under the chairmanship of the Union finance minister and have ministers in charge of finance/taxation or minister nominated by each of the states and Union territories with legislators as members. The council will make recommendations to the Union and states on important issues such as tax rates, exemptions, threshold limits, dispute resolution modalities, etc.

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