Hoping to move ahead with the Constitutional Amendment Bill for the goods and services tax (GST) in the current session of Parliament, the government approved amendments to the proposed legislation to compensate states for revenue losses for a period of five years, as suggested by the Rajya Sabha Select committee.
The decision was taken at a meeting of the Union Cabinet on Wednesday, in hopes to tide over concerns by states and win support of regional parties like the Trinamool Congress and the Biju Janata Dal in getting the Bill passed in the Rajya Sabha where the government does not have majority.
The government has set April 1, 2016, as the target for introduction of the indirect tax levy that would subsume Central taxes such as excise duty and service tax as well as a host of state taxes. Passage of the Constitutional Amendment Bill in Parliament is essential in the monsoon session to meet the deadline.
Accordingly, the Cabinet is understood to have approved the proposal to levy an additional one percent tax over the GST rates by states as well as the plan to finalise the ‘band’ rate for the tax while framing the rules.
The Rajya Sabha Select panel in its report last week recommended that the GST rate should not be more than 20 per cent. It also suggested that the 1 per cent additional levy by states should only be on actual sales and not on inter-company stock or inventory transfer. The Constitution Amendment Bill for a Goods and Service Tax (GST), to replace all indirect taxes like excise and sales tax on all products, except alcohol, has already been passed by the Lok Sabha and is pending passage in the Upper House.
Meanwhile, the Union Cabinet is also understood to have cleared the Consumer Protection Bill, 2015, that seeks to set up a regulatory authority that would be empowered to recall products and initiate class suits against defaulting companies including e-tailers. The proposed Bill, which would replace a near 30-year old law, is significant given the growing concern over consumer safety and health standards followed by companies. The Union Cabinet also approved a proposal allowing foreign entities to invest in Alternative Investment Funds, in order to attract foreign investments. The decision will help make available more funds to start-ups, early stage ventures, small and medium enterprises (SMEs), which are generally considered as high risk investments.