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Home >Politics >Policy >GST Bill gets Cabinet nod, likely in Parliament this session

New Delhi: The cabinet on Wednesday cleared the constitutional amendment Bill to ease implementation of the goods and services tax (GST) that seeks to unify India into a common market by replacing levies imposed by states and the centre.

The cabinet’s approval will now clear the way for the introduction of the draft legislation in the ongoing winter session of Parliament.

The Narendra Modi-led government hopes to implement the tax reform from April 2016. If implemented, GST will subsume indirect taxes including value-added, excise and service taxes. It will also remove barriers to goods movement across states and cut compliance costs for companies.

The government will need a two-thirds majority in both Houses of Parliament to get the Constitutional Amendment Bill cleared. It will then need to be approved by 50% of state assemblies.

The passage of the Bill has been stuck because of differences between the centre and states on the design of GST. States have been resisting the inclusion of petroleum in GST, particularly Gujarat and Assam, where major petroleum refineries are located, as they fear revenue losses from such a move.

To address the concern, the centre had proposed to include petroleum under GST in the Constitutional Amendment Bill, but not levy the tax in the initial few years. The industry favours including petroleum under GST as it will be able to avail input tax credit on petroleum products.

The centre has also proposed subsuming all entry taxes under GST.

The centre and the states have been involved in intense discussions over the past couple of weeks to iron out their differences over these contentious issues.

However, it is still unclear what kind of an agreement has been reached by both sides. The centre will need to get a majority of the states on board to successfully push through the reform, the implementation of which was initially slated from April 2010.

To address states’ concerns on loss of revenue after the implementation of GST, the centre has agreed to compensate states for losses for five years after GST is implemented. The centre will frame a separate law for this, according to a state government official who declined to be named.

Finance minister Arun Jaitley had announced earlier this month a compensation of 11,000 crore for losses arising from the gradual phasing out of central sales tax compensation as a confidence-building measure.

In a separate decision, the cabinet gave its approval to recalculate incentives given to sugar mills. This will help the sugar industry tide over the crisis arising from surplus stocks and subdued prices.

“The incentive rate for bimonthly periods of April–May 2014, June-July 2014, and August-September 2014 have been finalized, respectively, at 2,277, 3,300 and 3,371 per tonne. The total financial help is expected to be around 200 crore," the government said in a statement.

The cabinet, however, deferred a decision on setting up a regulator for the real estate sector, according to unidentified officials. The Bill, which was introduced in the Rajya Sabha in August last year, seeks to protect home buyers from unscrupulous developers.

The legislation was then referred to a parliamentary standing committee, which had submitted its report in February. The Bill provides for mandatory registration of all projects, besides mandatory disclosure of information like details of promoters, layout plan, land status, schedule of execution, status of various approvals and carpet area.

It also wants to enforce the contract between a developer and a buyer and provides for remedies in case of disputes. Property developers have been opposing the proposed law.

Sayantan Bera contributed to this story.

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