Serious Delhi-state differences likely on GST implementation

AT FIRST it looked like shadow boxing. India's ruling Bharatiya Janata Party (BJP) was determined to bring in the Goods and Services Tax (GST) Bill. For that, it needed a constitutional amendment to change the way people could be taxed. The largest opposition party, the Congress, was equally firm that it would not allow the constitutional amendment unless some clauses were changed. The Congress had, while in power earlier, proposed the GST but had been thwarted by the BJP, then in the opposition. Now the tables are turned.

The bill came closer to being passed when the federal Cabinet finally approved on July 27 key changes to the GST Constitutional Amendment Bill after the federal finance minister consulted state finance ministers. These changes meant the states would get full compensation for five years for revenue loss arising from the transition to GST, and the federal government would not impose an additional one per cent levy on supply of goods from manufacturing states. At the same time, the GST rate won't be capped at 18 per cent.

These were key demands of the Congress, which had insisted they be met if it was to back the legislation. Public opinion mostly supported the need for change. Transport of goods across the country would speed up as trucks would no longer have to wait at octroi nakas (stations) to be taxed at city entry points or state boundaries. The main push for the bill comes from business, which would operate in a "one India market" and not many that the present system supposedly ensures.