India’s Lower House of Parliament on May 6 passed a constitutional amendment bill to introduce a GST to replace several local and central taxes and thus simplify India’s indirect tax regime.
Moreover, during Lok Sabha debate, Finance Minister Arun Jaitley clarified that while it is up to the GST Council to set a revenue neutral tax rate, he believed the rate would be “much more diluted” than a 27 percent rate. Some have erroneously claimed that government sources advocate a 27 percent rate, Jaitley said.
Rajeev Dimri, leader of indirect Tax, BMR & Associates LLP. Dimri said that passage of the bill was widely expected by industry and that he welcomed the Finance Minister’s statements on the tax rate. He noted, though, that several amendments were made to the bill which have not yet been made public and are therefore of unknown significance.
Dimri also said that during the debate, while responding to a specific question on the cascading effect on additional tax, Jaitley stated that an objective was to provide compensation to the states in which goods were manufactured. No details were provided, however on how the cascading effect of levy of such additional tax would be minimized, he said. “It would be useful to wait and watch the views of the proposed GST Council which will eventually have a final say in these matters,” he said.
To become law, the bill must be passed by India’s Upper House of Parliament as well as more than 50 percent of the state legislature. The GST and would become effective April 1, 2016, according to budget documents.
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