The Union Finance Minister (FM) on 22 March 2011, introduced a Constitution Amendment Bill (the Bill) in the Lok Sabha to enable the implementation of ‘Goods and Service Tax’ (GST), an indirect tax regime that would subsume levies like excise, service tax and sales tax. The Bill seeks to amend the Constitution to authorise both the Centre and the States to levy taxes on supply of goods and services. This Bill is a culmination of three Draft Amendment Bills circulated by the Central Government – the First Draft dated 21 July 2010, the Second Draft dated 11 August 2010 and the Third Draft dated 28 January 2011.
Highlights of the Bill and the way forward
The Bill in its current form closely resembles the Second Draft as compared to the Third Draft.
The key areas of dispute that emerged with the earlier drafts of the Amendment Bill were the provisions contained in Articles 279A and 279B.
GST Dispute Settlement Authority (DSA)
The Bill will now be referred to a Standing Committee of the Parliament for scrutiny and recommendations. Post this, the Bill will be taken up for discussion and voting in the Parliament. When passed, the Bill needs to be ratified by half the State Legislatures.
Introduction of the Bill has provided necessary impetus to the proposed tax reform. The FM in the recent budget had already introduced certain measures like reduction in the number of duty exemptions, introduction of point of taxation rules, etc which would facilitate transition to GST. Today’s development further demonstrates Centre’s commitment to implement GST as early as possible, perhaps even by the middle of 2012.