GST rate will be lower than speculated 27%, assures Jaitley

Our Bureau New Delhi | Updated on January 23, 2018

Lok Sabha approves Constitution Amendment Bill; real test will be in Rajya Sabha

Finance Minister Arun Jaitley cleared the air on the GST (Goods and Services Tax) rate. While replying to the debate on the Constitution Amendment Bill, which was subsequently passed by the Lok Sabha, he said the GST rate will be much lower than the speculated 27 per cent.

Jaitley said neither the Centre nor the GST Council has given this figure.

RNR (Revenue Neutral Rate) is the rate of tax at which States will not have any revenue loss. However, 27 per cent RNR would mean that both goods and services will attract 27 per cent GST. The average GST rate globally is 16.4 per cent.

The rates will be decided by the GST Council itself, he said. When TMC leader Saugata Roy asked for a specific rate, the Minister said that he would not commit as that would lead to speculation.

“The 13th Finance Commission had suggested 18 per cent as a possible figure. Therefore, people suggest that these are large figures. This figure will include the entire kitty of taxation. That is something which goes to our natural advantage. This will have to be worked out,” he said.

The House approved the Bill with over two-thirds majority despite the largest opposition Congress staging a walk out. Now the bigger challenge before the Government is to get it passed in the Rajya Sabha where the Government is in minority.

Rules require each House to pass the Bill by the third-thirds majority. If the Bill fails to get Rajya Sabha nod then the Government cannot take it to the joint session and will remain pending.

The Government aims to implement GST from April 1, 2016.

Seeking to address States’ concerns, the Finance Minister said they will be compensated by the Centre for five years. “Our clear understanding with the States is, in a tapering manner the losses incurred by the States will be fully compensated for five years,” he said. As per the GST structure, 100 per cent compensation would be provided for the first three years, 75 per cent for fourth year and 50 per cent for the fifth year.

AIADMK leader M Thambidurai, questioned what will happen if states lose revenue even after five years and wanted a guarantee in the proposed Act to compensate. To this, Jaitley said GST Council will consider all such issues and the Centre will underwrite the loss.

He said concerns of both manufacturing States (such as Maharashtra, Tamil Nadu and Gujarat) and consuming States have been taken into account and states would stand to gain by implementation of GST. The new measure will also benefit mineral-producing states as well, Jaitley said after members from Odisha questioned about the fate of their states.

Where was Modi?

Prime Minister Narendra Modi was missing when the Constitution Amendment Bill went for voting. This was despite him being present in Parliament.

Modi's absence became known when after concluding his reply on the debate, Finance Minister Arun Jaitley asked Junior Parliamentary Affairs Minister Rajiv Rudy about the PM’s whereabouts.

Rudy replied that PM was having lunch and he had been communicated about the voting.

But both were unaware that the conversation was being overheard by those in the media gallery as the microphones were on.

BJP had issued a whip which made mandatory for all the members to be present in the House during voting. Modi represents Varanasi in Lok Sabha and considered to be very strict with rules and regulations.

Published on May 06, 2015

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