Goods And Service Tax Bill Faces Rajya Sabha Test Today

CII Director General Chandrajit Banerjee said, "In our view, this is the first step in making India a single market.

In terms of providing incentive to industry, this is the most extensive and far-reaching reform in the tax domain, which would encourage industry to grow significantly".

Responding to members' concerns that 27 per cent revenue- neutral rate (RNR) for GST as proposed by an expert panel would fuel inflation, Jaitley said, "I straightaway concede that 27 per cent would be very high... Government or GST Council has not decided on the rate... This figure is going to be much more diluted."

The RNR is the rate at which there will be no revenue loss to the states after GST implementation. The RNR for GST is under consideration and a final view on this would be taken by the GST Council.

The proposed GST Council will have Union Finance Minister as its Chairman and comprise two-third of members from states and one-third from the Centre. The decision of GST Council will need to be approved by a three-fourth majority.

"Necessarily cooperative federalism would be at play. To reach three-fourth, both Centre and states would have to work together," he said.

Once GST is implemented, the Centre and states will have concurrent power to levy tax on goods and services.

Jaitley said once the Centre doled out a package which includes 5-year compensation, 1 per cent additional tax and non taxation of petroleum products, the manufacturing states came on board.

"I do not foresee any state incurring a loss and the Constitution Amendment Bill provides that they would be compensated for five years," Jaitley said, adding the states would also get the share of service tax and that would compensate them for the losses.

Asserting that the government is committed to cooperative federalism, Jaitley said, "Federalism means strong states but it doesn't mean a weak Centre." He was responding when some members questioned why the Centre should have a veto power in voting GST Council even while having 1/3rd weightage in voting.

As per the GST structure, 100 per cent compensation would be provided by the Centre to states for first three years, 75 per cent for fourth year and 50 per cent for the fifth year.

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