Late on Monday, the Narendra Modi government listed the Constitutional (122nd) Amendment Bill for passage in the Rajya Sabha on Tuesday.
The move follows a key meeting between Prime Minister Narendra Modi and Tamil Nadu Chief Minister Jayalalithaa in Chennai last week. Sources indicated that the talks between Mr. Modi and Ms. Jayalalithaa had aided the process of narrowing the gulf on the key taxation reform.
Earlier, through back-channel negotiations, the differences between the government and the Opposition had been reduced to two points: the Congress’s opposition to the one per cent additional levy over and above the GST and to the proposed band for the States’ GST rate, the sources said.
The government proposed to empower the States to collect the one per cent additional levy over and above the GST during the transition period of two years to provide a cushion to the manufacturing States.
Centre takes States on board
The idea behind the government’s proposal to empower the States is to provide a cushion on GST to the manufacturing States since they expressed apprehensions about losing revenue. Their fears stem from the fact that GST will subsume all taxes that the States now charge at the factory gate etc and will instead be levied and collected at the point of consumption.
This one-per cent additional levy, however, is rendered unnecessary after the Cabinet’s approval last month of the Rajya Sabha Select Committee’s recommendation requiring the Centre to commit itself to compensating all losses to the States owing to the transition to the GST for five years, said a source.
He also indicated that after this assurance of full compensation, all manufacturing States, except Tamil Nadu, indicated that they were open to giving up this demand. Without sharing the details of the discussions at the meeting, the source also said: “The Prime Minister’s meeting with the Tamil Nadu Chief Minister was positive.”
The second point of contention the Opposition raised pertains to the proposal to allow for a band in which the States can peg their GST rates. While the States had earlier demanded a four percentage-points band, Revenue Secretary Shaktikanta Das told The Hindu on Monday that this range was now proposed to be of just one percentage point. This is closer to the Congress’s demand for a uniform State GST rate.
“As far as administrative measures are concerned, we are ready to roll out the GST…Parliament has to clear the Bill,” Mr. Das said.
Sources also indicated that the government was in touch with the Opposition and could even consider calling a special session or reconvening Parliament after Independence Day to pass the Bill.
