New Delhi – Addressing the Lok Sabha during the movement of the updated constitution amendment bill on Goods and Services Tax, Finance Minister Arun Jaitley disclosed that GST will reduce tax evasion to a large extent. Moreover, it will simplify the way in which business can be done by creating a common market throughout the country. Jaitley added that GST will ensure one tax in the entire country. The tax will result in the seamless transfer of goods and services in the country. He further said that GST is a major indirect tax reform, which will be beneficial for the country in the long run.

The necessity of passing GST again

In May 2015, Lok Sabha passed the GST constitution amendment bill. However, the house was forced to pass it again by a two-thirds majority to approve the amendments made in the Rajya Sabha. The government had moved six official amendments in addition to removal of 1 percent additional tax.

On being asked whether the GST rate will increase inflation, Jaitley clarified that it would be decided by the GST council, which will comprise representatives from both states and centre.

Jaitley added that both states and the centre will jointly pool their sovereignty together to create a new mechanism which will take all its decisions. He appreciated the efforts of all members for showing unanimous support to the GST bill. A divided parliament will not be beneficial for the country since the GST is an important legislation.

What GST will do?

Meanwhile, the minister disclosed that the GST will check leakages, increase the tax base, reduce tax evasion including the elimination of the cascading effect of the tax on tax. Furthermore, GST has been designed to improve the ease of doing business.

Passing of GST by states

As soon as the GST is approved and passed by the respective state assemblies, the GST Council will also draft Central GST, Integrated GST, and State GST.

While the CGST and IGST will have to be passed by Parliament, it is up to the states to pass their own SGST law. In the meantime, the GST Council will sit and work to draft the implementation techniques.

What happened in 2013?

To recall, the Kelkar Committee in 2003 had suggested the need to bring structural changes, which should be brought to the indirect tax regime. He said that after the NDA government under the leadership of Narendra Modi assumed office, active discussions were held with regard to compensation claims.

What UPA Government did in 2011 to GST?

He stated that UPA government in 2011 did not provide a clause for compensation. The NDA government has studied the GST Act in detail and added 3 years compensation. However, few states expressed displeasure and hence the government decided to fully compensate the states for 5 years.

In the GST Council, the states will have the two-third voting right and the Centre have a one-third vote. Hence, both states and the centre will have to agree to pass decisions.