Goods and services tax: Barriers on the road ahead

Victor Hugo once said “no one can resist an idea whose time has come”. Introducing GST in India was mooted way back in 2000 but it was only last month (on 6 May) that the bill containing constitutional amendments needed for GST’s implementation was passed by the Lok Sabha (lower house of parliament) with the required special majority. The bill has now been sent by the Rajya Sabha (upper house) to a select committee for consideration and comments, perhaps further delaying the start of GST.

Under the bill: (i) parliament and state legislatures are empowered to legislate on GST (India being a federal structure, both levels of government need the power to levy taxes on goods and services); (ii) various central and state taxes are to be subsumed in central GST and state GST; (iii) varying from the 2011 version of the bill, and to compensate for central sales tax, an additional 1% GST is to be levied for two years; (iv) a GST Council will be created in view of comments and concerns about the 2011 bill; and (v) alcohol for human consumption is excluded from the ambit of GST, etc.

Who wins: Bill or politics?

The journey from bill to act is far from over. The bill still requires passage in the Rajya Sabha by a special majority, and endorsement by at least half of the state legislatures followed by presidential assent.

Ranjeet Mahtani is an associate partner, Rajat Chhabra is a senior associate and Ketan Tadsare is an associate manager at Economic Laws Practice. This article is intended for informational purposes and does not constitute a legal opinion or advice.