GST is single biggest tax reform since 1947: Jaitley
New Delhi: Touting it as the “single biggest tax reform” since independence, Finance Minister Arun Jaitley today said the GST law will subsume all indirect levies including entry tax from April, 2016, which will ensure seamless flow of goods and services across the country.
The GST, which was hammered out after series of meetings with the states, is a “win-win” for both Centre and States and will provide for levy of 1 per cent additional tax by states for inter-state transfer of goods for two years.
“GST will ensure seamless transfer of goods and services, absence of Inspector Raj and no tax on tax,” Jaitley told reporters soon after tabling the 122nd Constitution Amendment Bill in the Lok Sabha.
The Bill will be considered for passing in the Budget session of Parliament beginning February, the Minister said, adding he did not feel the necessity of the legislation being referred again to a Standing Committee.
Under the provisions of the Bill, petroleum goods will be part of the GST but they will be levied at zero rate, implying that the states will continue to levy VAT while Centre will levy excise duty for initial few years.
Thereafter, it will be fully subsumed in the GST, the date of which will be set by the GST Council, which is made up of two third of states and the remaining of Centre.
The states, however, will continue to levy taxes on alcohol as is the practice now.
Explaining the Bill, Jaitley said that states will be allowed to levy 1 per cent additional tax for two years.
The GST will be a “win-win situation for Centre and states and is the single biggest reform after 1947″, he said.
Jaitley said: “This 1 per cent tax and the compensation mechanism for 5 years during the transition phase will be adequate, We do not envisage revenue loss to the states.”
As regards the compensation to the states on account of any possible loss of revenue following implementation of the GST, Jaitley said there will be 100 per cent compensation in first three years, 75 per cent in the fourth year and 50 per cent in the fifth year.