Cape of Good Hope! Government may scrap 1% inter-state tax in proposed GST

Congress had expressed its reservations on the bill saying that there are three major points that needs to be looked upon: 1% tax for manufacturers, the constitutional cap of 18 percent for GST rate and an independent dispute resolution mechanism for GST. Unless the government responds to these, they are unwilling to accede to the passage of the bill.

There is hope in the air for a conciliation between the government and the opposition on the stalemate of Goods and Service Tax (GST), as news reports have emerged that the government is planning to scrap 1% tax on interstate sales, which was proposed to compensate manufacturing states such as Maharashtra, Gujarat and Tamil Nadu , according to reports.

The purpose of 1% additional tax is to compensate the manufacturing States for loss of revenue while moving to GST.

Congress had expressed its reservations on the bill saying that there are three major points that needs to be looked upon: 1% tax for manufacturers, the constitutional cap of 18 percent for GST rate and an independent dispute resolution mechanism for GST. Unless the government responds to these, they are unwilling to accede to the passage of the bill.

GST has been the single largest taxation reforms measure to be undertaken since independence, and the BJP government has been fighting hard to broker a deal with all the parties. "We are making efforts for its passage. The public mood is almost one-sided in favour of the GST," Parliamentary Affairs Minister M Venkaiah Naidu told reporters.

The panel on GST, headed by Chief Economic Adviser Arvind Subramanian, is likely to recommend a rate around 18%. It is estimated that once implemented, it will increase the GDP by 1-2%.

India Inc. has also been hopeful that the bill sees the light of day in the ongoing session of the parliament. New ASSOCHAM President Sunil Kanoria  said it is time lawmakers across parties passed the Constitutional Amendment Bill on GST without further delay.  This would send a strong signal to investors that India’s economy can overcome serious global and domestic challenges with political will. He said GST can be a “Brahmastra” for the Indian economy against a very difficult global economic scenario, affected by demand slowdown, uncertain geo-political situation after the Paris terror attacks, and an unprecedented crash in vital commodities.