The Lok Sabha on Wednesday gave its consent to a far-reaching amendment to the constitution to pave the way for a pan-India goods and services tax regime and create a unified market across the country, doing away with multiplicity of central and state levies.
The Constitution (One Hundred and Twenty Second Amendment) Bill, 2014, was passed by a division with 336 ayes, 11 against and 10 abstentions. Lok Sabha Speaker Sumitra Mahajan announced the bill was approved with two-thirds majority of the house, as required.
Earlier, replying to the debate on the amendment bill, Finance Minister Arun Jaitley refuted opposition claims that the government was pushing through some amendments to some provisions without taking the house into confidence and refusing to send it to a parliamentary panel.
The finance minister said the same recommendations of the parliamentary panel, when the original bill was referred to it, were incorporated in the amended version and that the opposition had no reason to fault the government on this count.
One such amendment, he cited as an example, was to set up a goods and services tax council, with representations from the central and the state governments, to oversee any dispute, rather than leave it to a panel led by a retired Supreme Court judge.
Jaitley also warned that referring the amendment bill back to the relevant Standing Committee of Parliament would result in missing the target date for its implementation from April 1 next year, despite the broad consensus that had already been achieved after extensive consultations.
The constitutional amendment bill needs to be passed by a two-third majority in both houses of parliament and by the legislatures of half of the states in the country to become a law.
The main purpose of the bill is a unified regime that will subsume most indirect taxes levied by the central and state governments such as excise duty, service tax, value added tax, sales tax and octroi to facilitate a common market across the country.
"There would be more no tax on tax," the finance minister said referring to how these levies were leading to duplication, escalating the final price paid by customers, stoking inflation, standing in the way of efficient supply chains and preventing economies of scale.
He also mentioned that the union cabinet has recently approved payment of compensation to states for the loss they would incur on account of a cut in the central sales tax from four percent to two percent. This payment will be made for five years.
Finance ministry officials said preliminary estimates indicated that Rs.33,000 crore can be the amount payable to states and union territories for the entire period, and settling these claims will help create an enabling environment for rollout of the new regime.
The Lok Sabha approved a government amendment to help further states in the transition phase, by levying an additional tax of one percent on inter-state trade on goods. Like in the original bill, petroleum products, alcohol and tobacco were kept out of its purview till later.