Cabinet nod for GST bill, but Parliament test waits
16 Mar 2011
The union cabinet on Tuesday approved the constitutional amendment bill to roll out the long-delayed goods and services tax (GST), hoping that a debate in Parliament will help build a consensus on this crucial reform.
The new indirect tax regime seeks to replace a multitude of taxes, such as the central excise duty and services tax, and state taxes, including value added tax, entry tax and purchase tax, with a single levy.
However, with state governments - particularly the opposition-ruled ones - continuing to oppose the measure, it will be a test for the union government to ram it through Parliament, even in its heavily diluted version.
The proposed tax will have two components, one levied by the centre and the other by the states, implying that both will need to have concurrent powers to tax a good or service.
At present, the centre can impose taxes on goods at the factory gate and on services, while states can only tax goods at the retail point.
States do not have the power to levy tax on services. Thus, a facilitating constitutional amendment is needed to allow the centre and states to levy this tax simultaneously.
Finance minister Pranab Mukherjee had said in his budget speech last month that the government would introduce the bill in the ongoing session of Parliament.
