The Union Cabinet on Wednesday approved changes to the Goods and Services Tax Constitutional Amendment Bill, dropping the extra 1% levy on sales made between states. The clause had been opposed by several companies who had argued that this would pass the higher costs on to consumers. Finance Minister Arun Jaitley had in December, 2015, hinted that the additional 1% tax would be dropped. The Congress, too, had been opposing the extra 1% clause.
Among other changes were sections that provide for 100% compensation to states in the first five years from the time the new rate is introduced. The extra 1% levy on manufacturing states has also been dropped.
With these changes, it looks like the Central government has finally made progress towards getting the Bill passed, which it hopes to do during the ongoing Monsoon Session of Parliament. On July 20, Janata Dal (United) head and Bihar Chief Minister Nitish Kumar said his party was on board with the Centre’s Goods and Services Tax Bill, leaving the Congress as the only major party still opposing it.
The GST Bill seeks to bring in a single tax rate to replace India’s complicated current rules, which include Central excise duty, service tax, additional customs duties, value added tax, entertainment tax and so on. The Centre believes this will help create a unified market in the country, avoiding double taxation and increase compliance.