GST Bill passed by Parliament; Prime Minister Modi says it will end tax terrorism

New Delhi:The long-delayed GST Constitution bill was passed by Parliament today, marking a historic step for tax reforms which Prime Minister Narendra Modi said was “crucial” for ending tax terrorism besides reducing corruption and black money while making consumer the “king”.

The Constitution (122nd Amendment) Bill, which was passed by the Lok Sabha in May 2015, was taken up again by the Lower House to approve the changes made in it by the Rajya Sabha last week. The government had moved six official amendments, including scrapping of 1 per cent additional tax, to the bill which were approved by the Upper House.

After a six-hour debate, the Lower House passed the bill with all the 443 members present voting in favour after AIADMK members staged a walkout while opposing the measure.

Modi, while intervening in the debate, “humbly” thanked all parties for supporting the GST, saying it reflected “maturity” of the Indian democracy as such a crucial legislation was approved with consensus rather than on the basis of numbers.

He hailed it as a “great step by team India” that will help transform the economy, bring in transparency and bring in the system of “one country one tax”.

He emphasised that the passage of the bill by Parliament was not a victory of any party or government but was everybody’s victory as it highlighted the success of the democratic ethos of the country.

Jaitley, while replying to the debate, said the tax rate under the GST regime will be kept at “minimum workable rate” as no state government can annoy its people by having a higher rate. He said the rate will be decided by the GST Council.

He, however, virtually ruled out an assurance that the GST legislation will not be brought as Money Bill, a key demand of opposition Congress.

The bill will now have to be ratified by at least 16 of the 29 state assemblies, which the Prime Minister hoped would be done at the earliest.

“A memorable day for our democracy. Today we have taken a historic step in the journey to free the nation from the menace of tax terrorism,” the Prime Minister tweeted later.

“GST will benefit the consumer & small business, which are our nation s strength. Due to GST transparency will be enhanced. Its a win-win,” he added.

Describing the passage of the bill as victory of democracy, Modi, while speaking in Lok Sabha, coined the GST in a new manner — ‘Great Step by Team India’, ‘Great Step towards Transformation’, ‘Great Step towards Transparency’.

Noting that the GST bill had been firmed up after thorough “churning of ideas”, he expressed happiness that it was being passed through an unprecedented consensus.

Modi said he had held consultations with his predecessor Manmohan Singh and Congress president Sonia Gandhi on the issue, giving equal importance to Rajya Sabha and Lok Sabha.

“Rashtra Niti (national interest) is above Raj Niti (politics),” he said, adding GST will prove to be a catalyst in strengthening trust between the Centre and the states as everything will be transparent.

“I thank all political parties, as also state governments run by different parties. We are taking such a decision.. we have reached here after churning in Lok Sabha, Rajya Sabha, 29 states, their representatives and 90 parties.

We are putting a stamp on the final decision,” he said.

Underlining that the development marks the “recognition of One India” and strengthens this concept, he said, “We are aligning ourselves with new taxation regime…. GST is a new ‘moti’ (bead) in this ‘maala’ (necklace).”

He said his government’s focus is economic and educational empowerment of the poor and mitigation of poverty.

Modi asserted that the GST will benefit mainly those states which are considered backward and address the problem of imbalanced development.

He acknowledged that manufacturing states will suffer losses but said they will be compensated.

“August 8th marks a crucial step towards freedom from tax terrorism,” the Prime Minister said, while recalling that this was the day in 1942 when Mahatma Gandhi had sounded the bugle of ‘Quit India’ which marked a major step towards the country’s Independence.

“GST can’t be seen as a victory of a party or government.

It is the victory for democratic ethos of India and a victory for everyone,” he said, while noting that the measure was being supported by all parties, irrespective of different ideologies.

The Prime Minister said the new indirect taxation regime, which will subsume 7-13 taxes, will help end corruption as traders will be compelled to give proper bills and the consumer will be the “king”.

It will also help reduce the problem of black money and lead to generation of jobs by benefitting the small traders and entrepreneurs, he said.

Talking about benefits of GST, Modi said it will usher in simplification of procedures like filling of forms and bring about uniforminity of tax rates and processing.

Responding to Congress’ contention that GST was its idea being implemented by the NDA government, the Prime Minister acknowledged that all political parties and previous governments had contributed to making of the bill.

In this context, he quipped, “janam koi de, lalan palan koi kare. Krishna ko janam kisne diya, bada kisne kiya? (somebody may give birth, but someone else may nurture. Who gave birth to Lord Krishna and who brought him up?)”

At the same time, Modi said, “we do not have ‘guroor’ (arrogance) that his bill is the perfect one” even though “so many brains have made an effort which will have results”.

“It (making of GST) is a result of churning but it is true that we cannot be perfect and it cannot be ensured that in future there would not be any drawback,” he said.

Underlining that everyone dreams for “Ek Bharat Shreshtra Bharat’ (One India, Great India),” he said, “this is not just a taxation system but all states and the Centre will develop a system where small or big accept it.”

He expressed happiness that GST bill was not allowed to be politicised and rather became a national matter.

Responding to questions of Congress as to why he had opposed GST earlier in 2011 as Chief Minister of Gujarat, Modi said he had “many apprehensions” at that time and had met the then Finance Minister Pranab Mukherjee many times.

“As Prime Minister, having experience of Chief Minister, I could easily address the concerns of GST,” he said, adding “Experience of Chief Ministership helped in addressing the concerns and in removing many drawbacks.”

He said there was a crucial need for developing confidence among states as many of them had apprehensions about the Centre compensating them for loss of revenue.

Modi said he had underlined it earlier also that democracy cannot be based on numbers alone but decisions should be taken on the basis of consensus.

“It is true that in Rajya Sabha, the bill could have faced difficulty because of numbers… it is a journey of consensus… and we have to take this journey forward.

Therefore, we kept discussion on,” he said.

“The important thing is that this should not be decided on majority, we never wanted it…It is our effort to give importance to all views. We know that unprecedented consensus has been created. It helps in strengthing democracy,” he said.

Apparently referring to AIADMK which opposed the GST because of certain concerns, the Prime Minister said, “Some people here would be thinking that it should have been this or that way. Despite all, we have made effort to move this forward.”

AIADMK leader M Thambidurai questioned why the GST bill did not have the provision for permanent compensation to states when the Centre was acknowledging that they would lose revenue and hence would be compensated for five years.

Jaitley described it as “exaggerated fear” and said similar apprehensions had been expressed during VAT implementation which did not happen.

Stating that the rate in the new sales tax regime is a matter to be decided by calculations and not by political slogans, the Finance Minister said GST will bring in an efficient system and help bring down the tax rates gradually.

“They (GST Council) will, of course, try to arrive at a minimum workable tax rate and their effort will be to bring it down from the prevailing rate… Gradually, we will bring it further (GST rate) down because GST will bring efficiency and do away with tax-on-tax,” he said.

Jaitley said the new indirect tax regime, which will subsume all local levies, excise and service tax, will “check leakages, increase tax base for centre and states, eliminate corruption and cascading effect of tax on tax, reduce tax evasion, and improve ease of doing business.”

He said the Chief Economic Advisor had suggested a band of 16.9-18.9 per cent for fixing GST rate. While the NIPFP report had suggested that the rate be kept at 24 per cent, some states have been demanding between 20-22 per cent.

With regard to Congress demand that subsequent GST related bills should be brought as Finance Bill and not as Money Bill, Jaitley sought to explain why it cannot be done.

“…if it has the ingredient of Article 110 then it shall be deemed as Money Bill. If a ruling party fails to pass a Money Bill, then the government falls. Can you then say that it is not a Money Bill? So the option can work any way, what is within the definition of Money Bill, will be a Money Bill otherwise it is not a Money Bill,” he said.

As per the provisions in the Constitution, a Money Bill is discussed and put to vote only in the Lok Sabha.

Minutes after the historic legislation was passed, Modi walked up to the Opposition side and shook hands with Congress leader Mallikarjun Kharge and former Prime Minister H D Deve Gowda.

However, Congress Vice-President Rahul Gandhi had left immediately after the Bill was passed.

Modi also had a brief encounter with BJP veteran L K Advani with whom he exchanged pleasantaries, followed by External Affairs Minister Sushma Swaraj.

The PM was surrounded by fellow Lok Sabha members of his party, the allies and the opposition.

Except AIADMK, all parties support GST

New Delhi: Barring AIADMK, all political parties today supported the GST Constitution Amendment Bill in the Lok Sabha but asked the government to ensure that there is no adverse fallout on inflation and that states have some say in deciding the tax rate.

The Constitution (122nd Amendment) Bill, which was passed by the Lok Sabha in May 2015, was taken up again by the House to approve the changes made in it by the Rajya Sabha last week. The government had moved six official amendments, including scrapping of 1 per cent additional tax, to the bill which were approved by the Upper House.

Initiating a debate on the bill, Veerappa Moily of Congress said his party supports the proposed legislation which provides for ushering in a single indirect tax regime across the country by subsuming various taxes.

At the same time, he said the Centre should keep the tax rate low under the new GST regime and bring the subsequent legislations as Finance bills instead of Money Bills.

He said GST should not be in “vested interest” of Centre and states and the government should specify the “neutral agent” who will ensure that the common man does not become a casualty of the new indirect tax regime.

P Venugopal (AIADMK) opposed the bill, saying Tamil Nadu is a manufacturing and originating state which will suffer while consuming states will benefit.

The concerns raised by party chief J Jayalalithaa have not been taken into consideration by the Centre, he said.

He cited various issues raised by the party including that GST Council should not be a Constitutional body and petroleum products should be kept permanently outside the purview.

Moily said the 1991 reforms brought by then Prime Minister Narashimha Rao had made others come out with revolutionary thought on reform. He said the GST law could have come much earlier had there been a political consensus.

“Congress party will extend full support for implementing GST,” Moily said, a remark which was welcomed by Prime Minister Narendra Modi and other members of the Treasury benches by thumping of the desks.

Complaining that the NDA government had always viewed the Lok Sabha as a “junior partner” and did not take the House seriously, Moily said when the Lower House passed the GST bill in May last year, he had demanded that Joint Select Committee of both Houses of Parliament be set up.

“You think Rajya Sabha was important. When Rajya Sabha demanded Select Committee you agreed. You think there are no brains in the House (Lok Sabha). We demanded 1 per cent removal, you bulldozed it. But you had to come down in the Rajya Sabha,” the Congress leader said.

“Democracy is not only majority, but consensus of all parties, both inside and outside the House,” he said.

“I must say states and Centre have a vested interest in this. Who will be the neutral agent? who will be the loser? It is the common man who will be the casualty in this competitive attitude,” Moily said.

On inflation impact of the GST, he said, it needs to be studied greatly because it is not a short term problem.

As far as GST rate is concerned, he said it has to be low as it prevents distortion.

Citing an example, Moily said increasing rate from 10 to 20 per cent raises distortion by four times.

The rate should be like a bee which collects honey without harming anyone, he said, adding 18 per cent tax indicate some profit element to everyone.

Wondering what is there for a common man, Moily said “GST is bonanza for central government, state government and business, which should be shared with the consumer…we need to engage people.”

Malaysia which implemented GST last year has been witnessing protests as it has resulted in rise in prices.

“There has to safeguard against inflation and corruption…RNR should be carefully calculated. Next GST Bill should be a finance Bill and not a money Bill,” he said.

There is an opinion circulated that it will lead to one country, one tax but even after the implementation there will exist 38 taxes, the Congress leader said.

He also pitched for judiciary to be part of Grievance Redressal Mechanism to be set-up after the implementation of the GST. “Even the Standing Committee headed by Yashwant Sinha suggested that it should be headed by judiciary,” he said.

On the April 2017 deadline, Moily said it is too optimistic to think that the entire process will be finalised within 10 months. “You have given a roadmap, but there is no flesh or bones,” Moily said.

He said half-baked legislation brings in more difficulty and Congress when they brought VAT, the rate was kept low at 4 per cent.

While supporting the Bill, Kalyan Banerjee (TMC) said state revenues should not be affected in case of IGST and compensation should be paid in full for 5 years as the proposed amendment does not talk of full compensation.

Tax rates should be based on two principles – one that it should not be high and two, the tax rate should not be such that revenue of states should suffer, he said, adding GST Council should be formed as soon as possible and Model GST Law should be made public and discussed publicly.

“I have a request to Prime Minister that for every work done in the country, Prime Minister himself claims credit…

Prime Minister forgets state executives worked hard so that Centre sees the face of success. Today, Prime Minister should say that because of Chief Ministers, Finance Ministers and all political parties, this GST BIll has been passed,” he said.

Banerjee also sought a response to West Bengal Chief Minister and Finance Minister’s demand for a special package to West Bengal.

Making an intervention, Deputy Speaker M Thambidurai said, “in relay race, the last person gets credit.”

Supporting the Bill, Tathagata Satpathy (BJD) said the legislation will attack and erode the very independence of states.

“We support GST in principle but we have moved amendments,” he said.

Satpathy said the Prime Minister said “something about ‘gau rakshaks’ yesterday and he is also aware of problems that Chief Minister of a state faces, he said. “We should not leave GST to bureacracy…I would urge the Centre to share clean energy fund with coal producing states.”

Anandrao Adsul (Shiv Sena) said his party supports the Bill but octroi and cess should be worked out as it not only provides revenue but also helps movement of goods freely.

Citing an example, he said because of octroi, 26/11 terrorist preferred water route because of a threat of checks at the toll gates.

Supporting the GST bill, Jithender Reddy (TRS) said the tax rates should be kept low, while protecting the revenues of the states. He demanded that the Centre should release Rs 10,440 crore to the state on account of CST compensation.

P Karunakaran (CPI-M) said GST being a regressive tax, it would hurt the poor. Hence, the aim of the tax should be to minimise its impact on the poor.

While supporting the law, he sought to know from the Finance Minister as to how the states would raise their resources in the event of a catastrophe or a disaster.

Rajamohan Reddy (YSRCP) supported the legislation and also sought an assurance from the Centre that the state of Andhra Pradesh would be given the special status.

Tariq Anwar (NCP) said the government was “packaging” the GST as if it would do away with poverty, help check black money and also deal with unemployment.

“If GST was so important a legislation, then why did they oppose it for so long? Was it a mistake on their part? Did they change their stance when they moved to treasury benches from the opposition,” he asked.

Anwar also said that the government should first garner support from the Sangh affliated trade unions for supporting the reforms in FDI and taxation.

Dharmendra Yaday (SP) said that a large state like Uttar Pradesh should have bigger say in the GST Council which will decide the rate and oversee implementation of the new indirect tax regime.

Prem Singh Chandumajra (SAD) said the implementation of the GST would ensure more revenue for the exchequer by checking tax evasion and give a boost to employment generation by promoting industrial activities.

Observing that while in the opposition, BJP had opposed the GST but now was keen for its passage, Jay Prakash Narayan Yadav (RJD) said that special care should be taken for the needs of the farmers and smaller states.

Sirajuddin Ajmal (AIUDF) demanded that there should be more clarity and transparency in the GST for the benefit of the industry.

Heena Gavit (BJP) said that implementation of the GST will help in raising India’s ranking in the ease of doing business index of the World Bank.

Stating that he still does not know the reasons why BJP had opposed the Bill in 2011, Congress leader Mallikarjun Kharge said had there been no opposition to it at that time, then GST could even have been implemented two years earlier benefitting the economy.

Referring to criticism that Congress was obstructing the Bill, he said the delay was because of BJP.

“Don’t put the blame on us (Congress)… GST was our idea… We are the creator,” he said, adding that giving the support should not be taken as a licence to increase tax.

While seeking an assurance from the government that GST Bill would not be brought as a Money Bill, Kharge told Speaker Sumitra Mahajan that he knows what is in her mind, eliciting smiles from the members.

Then Mahajan, in a lighter vein, said, “this is an indirect request”.

The Lok Sabha Speaker has the power to decide whether a particular Bill can be considered as a Money Bill or not.

TMC leader Sudip Bandhyopadhya also remarked that the Speaker has the choice.

Deepender Singh Hooda (Cong) urged the government to make sure that there is an “equitable tax” system and not burden the poor.

Hooda contended that GST itself is a “regressive tax” and that efforts should be made to ensure that in due course the proportion of indirect taxes should shrink in the overall tax.

The government’s policy of having lower corporate taxes and putting the tax burden on the poor people as led to a situation where the number of billionares are on the rise, he alleged.

Hooda also asked the government to give an assurance that GST Bill would not be brought in as a Money Bill.

PM walks up to opposition to thank them for support

New Delhi:After the passage of historic GST bill by Lok Sabha, Prime Minister Narendra Modi walked up to the Opposition and shook hands with Congress leader Mallikarjun Kharge and former Prime Minister H D Deve Gowda.

Apparently conveying his thanks for their support, he had a brief interaction with them.

However, Congress Vice-President Rahul Gandhi had left by then.

Modi also had a brief encounter with BJP veteran L K Advani with whom he exchanged pleasantaries, followed by External Affairs Minister Sushma Swaraj.

The PM was surrounded by fellow Lok Sabha members of his party, the allies and the opposition.

With the Finance Minister Arun Jaitley assuring that concerns of Muncipal Corporations would be addressed, Shiv Sena, which has been at odds with the BJP in Maharashtra, congratulated the PM as also by other allies—the Shiromani Akali Dal (SAD).

Members of TMC, BJD and AIUDF also walked up to him.

PTI