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GST Bill: Govt-opposition bonhomie may not last long

Opposition apprehends that govt may convert subsequent GST legislations into Money Bills to avoid Upper House.

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Even as the Opposition lent a helping hand to the government on Wednesday for the passage of the major tax reform Goods and Services Tax (GST) legislation, the bonhomie may not last long. Several members including Congress leader and former Union Minister P Chidambaram and JD(U) leader Sharad Yadav apprehended that the government may make subsequent GST legislations as a ‘Money Bill’ to avoid Upper House scrutiny. 

Former finance minister Chidambaram, Yadav and other MPs asked the government to bring future GST legislations as 'financial bills' to allow both the Houses of Parliament to discuss and vote on them. 

A Money Bill can be introduced only in the Lok Sabha. Though it is transmitted to the Rajya Sabha for consideration, it has limited powers and can neither reject nor amend the Bill. The Rajya Sabha can only make recommendations and has to return the Bill with or without recommendations to the Lok Sabha in 14 days. With the government in minority in the Rajya Sabha, which kept the GST Bill on hold over the past two years, for the purpose of accentuating the process of implementation, the government may declare subsequent legislations as ‘Money Bill’ to limit them to the Lok Sabha only, where it has considerable majority. 

As Finance Minister Jaitley stressed in his introductory remarks, the Constitution Bill has to go back to the Lok Sabha to approve the amendments made by the government to secure the Rajya Sabha's support, then ratified by at least 15 state legislatures and thereafter three laws will have to be enacted -- two by the Parliament on the Central and state GST and one by every state legislature in the country -- to make it a reality. Jaitley said the IT (information technology) network for levying the new tax is already in the advanced stage of readiness to facilitate the GST's implementation from April 1 next year.

Former finance minister Chidambaram, who was making his maiden speech since election to the Rajya Sabha from Maharashtra, also sought the cap of 18% on the proposed Goods and Services Tax (GST) to prevent changes at the whim of the executive (govt), declaring that the Congress will campaign for it with the political parties and the people across the nation.

The government refused the Congress advice to put this cap in the Constitution Amendment Bill discussed in the Rajya Sabha to bring the GST that replaces the multiplicity of the Central and state indirect taxes, but it cannot escape from fixing the rate in the actual subsequent GST Bill. The law will not survive the judicial scrutiny unless the rate is mentioned, Chidambaram said.

Chidambaram was the opening batsman from the Opposition after Finance Minister Arun Jaitley piloted the Constitution Bill, hanging in the Rajya Sabha for the last one year  for discussion, stating that the government was leaving for the GST Council, comprising 2/3rd state representatives and 1/3rd central representatives, to decide the tax structure.

Later while addressing reporters in the premises of Parliament, Chidambaram laid stress on keeping the GST as low as possible since it will be an indirect tax that is regressive by nature impacting equally the rich and the poor unlike the income tax heavy on the rich. As he was at the helm of the finance ministry in 2005 when the UPA government conceived the GST, he narrated the balancing act thought to let it be low as also have the Revenue-Neutral Rate (RNR) to protect the revenue of the government, particularly the state governments.

He pointed out that 70% of goods today attract 12 to 14% of excise duty and value-added tax (VAT) and show the government's chief economic adviser worked out the RNR at 15 to 15.5% and therefore suggested 18% GST on the ground that it will be "non-inflationary." The Congress did not pluck 18% as the cap from air, but from the government's own report.

The former finance minister asked the government not to go by the advice of the corporates as they have no problem if GST is set at a higher rate since they would pass on to the consumer whatever tax is levied. He said a cap in the law will ensure that it can be changed only by Parliament and not just by a gazette notification by the government.

On the hints dropped that the GST may be fixed at 20 to 26%, the former finance minister warned that it would not only trigger huge inflation, but also lead to tax evasion and inefficient recoveries by the government. The standard rate applicable to over 70% goods should not exceed 18%, he said, stating that he had no problem with a higher rate in case of the "sin" goods like alcohol, tobacco and big foreign cars.

He admitted that the new tax had many outstanding issues that the UPA government could not resolve and so "we failed" while the present government too failed without the Opposition's support. It is the change of the government's tone, with friendly and conciliatory gestures, that the Constitution Bill will be now passed to pave way for ushering in the new tax at a flat rate across the country, he said.

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