Rajya Sabha clears GST Amendment Bill. Twitter hails the big feat

In what is being hailed as the single-most important economic legislation since the 1991 liberalisation of the Indian economy, the Rajya Sabha on Wednesday passed the Goods and Services Tax (Constitutional Amendment) Bill.

Union finance minister Arun Jaitley, after much deliberation with state finance ministers, including Amit Mitra of West Bengal, had introduced the debate in the Upper House of Parliament on Wednesday morning.

Arun Jaitley said, “The merits of the system are that it will convert India into one economic market and will introduce a uniform tax across the country, check evasion of tax. This would also give a boost as far as growth rate is concerned.”

The BJP government at the Centre, as well as several of the state governments, had been waiting with bated breath for the Rajya Sabha to reach a unanimous decision on this crucial tax reform issue, even though the GST Bill was originally drafted by the previous UPA government.

The Bill was passed in the Lok Sabha in May 2015, though the Opposition, principly the Congress, had been objecting to certain clauses within the earlier version of the Bill.

Prime Minister Narendra Modi has congratulated everyone, as have many important figureheads from the BJP.

World famous economists such as Kaushik Basu, currently chief economist at World Bank, hailed the passing of the GST Bill.

There were caveats sounded at various points, particularly by former Union FM  P Chidambaram, and Sitaram Yechury, general secretary of CPI(M) and a member of the Rajya Sabha.

Chidambaram, mainly, had expressed objection to the possibility of the GST not being trudged through Parliament as a money bill, and instead be passed as a financial Bill because it's a constitutional amendment legislation. Moreover, Chidambaram had also wanted that the new tax rate be capped at 18 per cent, because otherwise the inflation may spiral out of control.

The Samajwadi Party, Trinamool Congress, Janata Dal (United) and others, along with the Congress, were in favour of the Bill. Bengal FM Amit Mitra has played a key role heading the Empowered Committee of finance ministers who deliberated over the Bill.

However, there was conditional support for the GST Bill across parties, with the exception of chiefly AIADMK and the CPIM. Jayalalithaa's party and Tamil Nadu’s ruling dispensation remained opposed to the Bill till the end, and the AIADMK members stageda  walk out before the Rajya Sabha put the GST to vote on Wednesday.

What is the GST?

The GST is a single indirect tax for the whole country, intended to turn the all parts of India into one unified common market.

It is a single tax on the supply of goods and services, right from the level of the manufacturer to that of the consumer, bypassing 17 other intermediate tax structures, chiefly the individual state taxes.

GST essentially is a tax only on value addition at each stage, which means it is favoured heavily towards the consumer, but may mean the manufacturer taking a relative dent. However, since it does away with a lot of intermediate taxation, the overall effect is to help everyone.

GST is supposed to spur investment and growth because it expected to usher in greater transparency, easy compliance with rules and regulations, uniformity of tax rates, removal of cascading effect on taxes, more competitiveness, leakage plugs, revenue efficiency, among other host of benefits.

However, states are worried that GST may sound the death knell for fiscal federalism and result in increased centralisation of tax regimes. CPIM's Sitaram Yechury reiterated this point again and again in this powerful speech in the Rajya Sabha that the poorer states must not be left to fend for themselves.

Also, this would mean any economic torrent would spread out in all directions and that could spell severe fiscal difficulties for poorer states.