Long-awaited GST Bill in last lap as Arun Jaitley soldiers on

The Government is likely to introduce the long-awaited GST (goods and services tax) Bill for discussion in the Rajya Sabha this week after Finance Minister Arun Jaitley meets state finance ministers on Tuesday for a final discussion on the issue. The GST Bill that has already been passed by the Lok Sabha where the ruling NDA alliance has a clear majority but is stuck in the Rajya Sabha.

He is expected to discuss some of the changes demanded by the Congress in the constitutional amendment Bill, including one related to the scrapping of one per cent additional tax that some states want to levy.

The 1 per cent additional tax on inter-state sales was proposed as manufacturing states like Gujarat and Tamil Nadu were of the view that after having invested in putting up infrastructure, they would lose out on revenue with the introduction of GST as it is a destination tax.

The Goods and Services Tax (GST) Bill will be listed for discussion in the Rajya Sabha after taking on board views of the states.

Jaitley, who has been engaged in back-channel negotiations with Congress leaders to get the main opposition party on board, will discuss proposed amendments to the GST legislation passed by the Lok Sabha at the meeting of the empowered committee of state finance ministers.

The Congress, which had originally floated the plan for GST in 2009 to replace all indirect taxes, has been demanding that the overall rate be capped at 18 per cent and scrapping of an additional 1 per cent tax designed to compensate manufacturing states that fear losing out on revenue. It also wants an independent mechanism to resolve disputes between states over revenue sharing.

While Jaitley has indicated his openness in scrapping the 1 per cent additional tax after a panel headed by Chief Economic Advisor Arvind Subramanian favoured it, the issue needs to be discussed with the manufacturing states.

In order to mobilise support from regional parties for the long-pending indirect tax reform, Jaitley met Bihar Chief Minister and JD(U) leader Nitish Kumar and also held discussions with senior leaders of Andhra Pradesh and Telangana over the weekend.

The government is counting on regional parties to push through the legislation in the Rajya Sabha. After meeting Jaitley last week, Bihar Chief Minister and JD(U) leader Nitish Kumar is backing the government's move of not putting the tax cap in the Constitution amendment Bill.

The TMC and the BJD have already extended their support. Jaitley is also trying to get SP on board in this regard.

GST would subsume all indirect taxes like excise, sales and service levies. In the new regime, there will be one Central GST or C-GST and State GST or S-GST. States levy sales tax or VAT on goods sold within their jurisdiction and get a Central Sales Tax (CST) on sales made outside their territories.

This CST will no longer be available in the new regime and a 1 per cent additional tax was proposed to make up for that.

The GST Bill, which intends to convert 29 states into a single market through a new indirect tax regime, was earlier planned to be introduced from April 1 this year, but the bill ran in to hurdle in the Opposition-dominated Rajya Sabha.