The landmark bill on Goods and Services Tax (GST) on Wednesday won majority support of the Rajya Sabha Select Committee, which endorsed almost all the provisions while also agreeing to demands of parties like Trinamool Congress for a five-year compensation to states.
The committee, headed by BJP's Bhupender Yadav, in its report submitted to the House suggested changes in clauses pertaining to compensation and levy of 1 per cent additional tax by the states on inter-state supply of goods.
The report, however, is marked by dissent notes from Congress, All India Anna Dravida Munnetra Kazhagam (AIADMK) and Left parties, which have expressed their opposition to the GST Constitution Amendment Bill in the existing form.
The bill, which has already been approved by Lok Sabha, will now have to be taken up for passage in the Upper House.
As it is a Constitution Amendment Bill, the bill has to be approved by two-third members in the Rajya Sabha.
The ruling Bharatiya Janata Party (BJP) government does not have a majority in the upper house of Indian Parliament, Rajya Sabha, and will have to depend upon support of regional parties and allies for passage of the bill.
The committee has suggested that the provision in the bill that provided Centre "may" compensate states for a period up to five years for any revenue loss be substituted by a commitment for compensation for five years.
In a clause relating to levy of 1 per cent additional tax by states, the committee suggested that the levy should only on "all forms of supply made for a consideration".
It, however, retained the representation of the Centre and States at the proposed level at one-third and two-third despite demand to reduce Centre's representation to one-fourth.
The government's plans to roll out a single-rate Goods and Services Tax (GST) by April 1, 2016. The GST, which is being touted as the biggest reform in the indirect taxation since independence, would subsume levies like excise, service tax, and other local levies.
"Administratively we are taking all steps both Centre and states to meet April 2016 deadline. Effort would be to have reasonable rate of GST so that GST experience is a successful experience for the whole country," Revenue Secretary Shaktikanta Das told reporters here.
On the specific point of levy of 1 per cent additional tax by states, the Committee said, "additional tax in its present form is likely to lead to cascading of taxes".
The committee recommended that in the bill should define the the word supply as "all forms of supply made for consideration".
As regards taxation of petroleum products, the Committee endorsed the provisions of the GST Constitution Amendment Bill under which a decision on taxation would be taken by the GST Council.
To increase the resources of states, the Committee suggested that the "band" rate should be defined in the Act itself. The proposal would provide option to states to levy additional taxes within the band on specified goods and services to raise additional resources to meet local needs.
On compensation to the states for revenue loss following implementation of the GST, the Committee suggested that the Bill should clearly provide for compensation for a period of five years.
As per the current compensation mechanism decided by the Centre, the Union Government will give 100 per cent compensation for first three years of GST implementation and thereafter 75 per cent and 50 per cent in the fourth and fifth year.
The report of the Rajya Sabha panel had three dissent notes by Congress, AIADMK and Left Parties.
In their dissent notes, Madhusudan Mistry and Bhalchandra Mungekar (both Congress) and Mani Shankar Aiyar (nominated) said that the Bill "is pitted with compromises, exclusions and exceptions that make it impossible for us to extend our support to the Bill..."
AIADMK in its dissent note demanded that petroleum should be kept out of GST and the representation of the states in the GST Council be reduced to one-fourth from one-third.
The GST Council is entrusted with the task of overseeing its implementation, besides deciding on rates and exemptions.
The Left parties raised concerns about the dominant role of Centre in the GST Council and said "GST should not be in the interest of corporates who want a free flow of goods and services".