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Indian parliament Wednesday passed the landmark Goods and Services Tax (GST) bill, the country' s biggest tax reform since its independence from Britain in 1947.
After a day-long debate in Rajya Sabha (Upper House), almost all the political parties including the main opposition Congress, voted unanimously for the GST bill that aims at streamlining India' s fragmented tax system with a single levy.
The bill was passed by Lok Sabha (Lower House) last year, but it has been stuck in Rajya Sabha, where Prime Minister Narendra Modi's Bharatiya Janata Party does not command a majority.
However, it will now be sent back to Lok Sabha again for the amendments to be cleared by the Lower House.
Moreover, Indian states will now have to pass further laws to determine the rate and scope of the tax in the bill that seeks to replace a slew of federal taxes and levies in the country's 29 states.
Earlier in the day, the Congress, which has been opposing the bill so far, announced its support for the Constitution (122nd Amendment) Bill, 2014, but with a rider.
Speaking after Indian Finance Minister Arun Jaitley tabled the bill in Rajya Sabha, former Finance Minister P. Chidambaram said his Congress party supports the "idea" of GST, but the bill must be put to debate and vote in both Houses and the tax has to be capped at 17 to 18 per cent.
"The Congress party was never against the idea of GST. The country is now ready to embrace the GST. The Congress had opposed the 2014 bill but not the idea. We wanted it to be more perfect. But there can never be a perfect bill," he said in Rajya Sabha.
On his part, Jaitley justified, "There will be no cascading effect of tax on tax. In Consumer Price Index basket 55 percent items are tax-exempt, 32 percent are at a low rate, only 12 percent at a standard rate."
"Unfair to say that the central government has a veto on states, even states have veto on the centra; government. Both are compelled to work with each other. The union of states can't exist without union," he said.
The Finance Minister added: "Both the Centre and states will retain their sovereignity. We are experimenting a new idea so that the central and state will have uniform tax structure. The states have to be stronger but the union has to be strong too."
Indian businesses have been lobbying for the single tax rate as it would reduce costs, mainly for shipping goods across state borders, and economists say it could boost India's economic growth by up to 2 percentage points.
Analysts say the GST will lower the prices of some goods like electronic items and two-wheelers. But services such as eating out or using a beauty salon or plane tickets will become more expensive.
(APD)
