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Indian Cabinet Clears Bill To Introduce GST

by Mary Swire, Tax-News.com, Hong Kong

22 December 2014


At its meeting on December 17, India's Cabinet approved the Constitutional Amendment Bill that would allow for the introduction of a goods and services tax (GST) in India. The Bill will now be tabled before Parliament.

An amendment to the constitution is needed to allow States to levy taxes on services. It is proposed that the Amendment Bill would also permit GST to be levied on petroleum products and alcohol in the future, although neither will be subject to tax when GST is introduced. States will, however, be able to set their own rates of GST on alcohol.

India's Finance Minister, Arun Jaitley, has been holding intensive meetings with States in an attempt to secure support for the Bill by the end of the winter session of Parliament on December 23. For the GST plans to move forward, Jaitley requires support from two-thirds of lawmakers in both houses of Parliament and support from 15 of 29 states.

Jaitley has sought to sweeten the deal for States with a guarantee that the Center will make good any tax losses as a result of the introduction of GST for three years. Thereafter it would reimburse 75 percent and 50 percent of any loss to States' tax revenues for the fourth and fifth year after the introduction of GST. This is in addition to compensation for earlier reforms that reduced States' share of Central Sales Tax.

Providing the Bill gets approval, India would introduce a dual GST regime from April 2016, featuring a Central GST (C-GST) and a State GST (S-GST).

TAGS: Finance | tax | value added tax (VAT) | India | law | goods and services tax (GST) | services | Tax

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