GST Bill passed by Parliament; PM says it will end tax terrorism

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.