There will be no cascading effect of tax on tax, said Finance Minister Arun Jaitley. (Photo: Reuters)

After an over seven hour-long debate, the Rajya Sabha today passed the long-pending Goods and Services Tax (GST) which is being described as the country's most transformative tax reform in decades. Barring All India Anna Dravida Munnetra Kazhagam (AIADMK) most other parties supported the bill.

The Congress, which has been opposing the bill so far, also announced its support for the Constitution (122nd Amendment) Bill, 2014 but with a rider.

Speaking after Finance Minister Arun Jaitley tabled the bill in Rajya Sabha, former Finance Minister P Chidambaram said his party supports "idea" of GST as well as the bill, which he noted had been improved after the government held talks with various parties, including his.

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"The Congress party was never against the idea of GST. The country is now ready to embrace the GST," he said, adding his party had opposed the 2014 bill but not the "idea". We wanted it (bill) to be more perfect. But there can never be a perfect bill," he said.

TAX ON TAX WILL BE TOTALLY ELIMINATED: JAITLEY

"There will be no cascading effect of tax on tax. In Consumer Price Index basket 55 per cent items are tax-exempt, 32 per cent are at a low rate, only 12 per cent at a standard rate," the finance minister said.

"Unfair to say that Centre has a veto on states, even states have veto on Centre. Both are compelled to work with each other. The union of states can't exist without union. Both Centre and states will retain their sovereignity. We are experimenting a new idea so that the central and state will have uniform tax structure. The states have to be stronger but the union has to be strong too," Jaitley said.

CONGRESS SETS CONDITION FOR SUPPORT OVER GST

Spelling out the problems his party had with the bill, he said Congress wanted a cap of 18 per cent on the tax rate under GST, scrapping of 1 per cent retrogade tax besides setting up of disputes redressal mechanism for resolving issues arising out of tax disputes between states.

"The government was (initially) rather stubborn...I, on behalf of my party, loudly and clearly wanted that the tax should be not more than 18 per cent...Taxation is the exclusive power of Parliament, we can give some leverage to the Executive, but it should remain the domain of Parliament.

"I want an assurance from the Finance Minister that when the GST Bill is brought, it will brought as a financial bill and not as a money bill. This is far too transformational and important legislation that one House of Parliament should just speak on it and the other will vote. We want that both Houses should debate and vote on it," he said.

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Accusing the government of bringing GST to favour the corporates, Chidambaram said his party Congress had to speak for the common people, who were the "third factor" besides the Centre and states, that would be affected by taxes.

MOST SIGNIFICANT TAX REFORM IN INDIA

Moving the bill in the Upper House, Jaitley said it was one of the most significant tax reforms in India in recent history that has been brought after a "broad consensus" with various political parties.

"I am sure the enactment of GST will bring about the best economic management in its federal form," Jaitley said while commending the bill for consideration.

He said legislation was being enacted in the best possible way in the Indian federalism.

He said there was a need for a political consensus as far as possible to bring this bill and a process of dialogue with all major political parties and states was undertaken and the "best possible output was incorporated in the bill".

AIADMK OPPOSES THE BILL

Navaneetha Krishnan of the AIADMK opposed the bill, saying "This constitutional amendment Bill is not valid. It violates the states' fiscal autonomy. It will give permanent revenue loss to Tamil Nadu. We oppose it."

"It also violates Article 21 of the Constitution. This Parliament has no competence to bring this Bill violative of federalism," he added.

Arguing that the south Indian state of Tamil Nadu is a manufacturing state, he said the state will lose substantial revenue.

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"GST method of levying tax is destination-based, not origin-based. So we strongly oppose it. We will lose Rs 9,270 crore. This is not a small loss. Even after 5 years, centre should compensate states for any loss," he said.

LEFT RAISES QUESTIONS

Expressing serious apprehensions that the GST regime will hit the country's federal structure, CPM's Sitaram Yechury sought an assurance from the finance minister that "when the GST comes, ensure that there will be flexibility so states are not forced to come with begging bowls to ask for money."

"Some flexibility should be given to the states. I demand an assurance on this issue," he said.

Quoting Bhimrao Ambedkar, he said "if we permit provinces to collect sales tax, a ceiling from the Centre will be a handicap."

Terming GST as a regressive tax, he said GST should be kept low as it will burden the poor more as already 62 per cent comes from indirect taxes.

"If you do not have a cap on GST, it will be increasingly regressive tax to burden the people...The supremacy of sovereignty in the Constitution is the people. The interests of the people are supreme. Are those interests going to improve or deteriorate," Yechury sought to know.

Yechury said while the number of billionaires was increasing, the census figures showed that 90 per cent of Indian families earned less than Rs 10,000 a year and remarked: "you are widening the hiatus between two Indias."

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