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India's GST Progress Derailed By Upper House

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

13 May 2015


India's Government has suffered a setback in its efforts to install a goods and services tax (GST), after the upper house of Parliament delayed its vote on the Constitutional Amendment Bill, which would enable states to levy the GST on services.

The earlier approval of the legislation by the lower house on May 6 was seen as a major vote of confidence in the reforms and was welcomed by the International Monetary Fund.

However, the rejection of the legislation by the upper house has placed the future of GST in doubt once again, after more than a decade of drawn-out negotiations, and means the legislation will now have to return to a parliamentary committee. The legislation will now be resubmitted in July, placing in doubt the Government's ambitious goal of having GST effective from April 2016.

The constitutional amendment bill is the first major piece of legislation that the Government must pass in order to install the GST, with negotiations ongoing on GST rates and the regime's scope, with provisions to feature in separate legislation that must also be adopted.

Under the GST proposals, the various elements of the existing indirect tax regime (including the VAT itself) will be replaced by a comprehensive dual-GST system, with Central GST and State GST to be levied concurrently by the center (federal Government) and the states, respectively.

India's Finance Minister, Arun Jaitley, requires support from two-thirds of lawmakers in both houses of Parliament and support from 15 of 29 States to move forward with the GST plans.

TAGS: Finance | tax | India | law | legislation | services

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