The long wait for the path breaking Goods and Service Tax (GST) is coming to an end with the Union Cabinet ratifying the Constitution amendment bill.
Major feature of the amendment is that the center will compensate in 100% for the revenue loss incurred by the states. This is a much strong compensation package than proposed in the initial format of the bill.
Similarly, the amendment also abolishes the 1% additional tax within the GST for the producer states. The Congress and other opposition parties demanded its removal as such a tax will raise the burden on the tax payers.
Empowered council of the state finance ministers- the coordinating body for designing the GST, in its meeting with the Finance Minister has decided not to include the GST rate in the constitution. This demand was considered an unusual one which is against the procedure of tax policy.
The GST announced in the 2006 budget is going to happen after ten years of struggle on political and federal lines.
One of the jubilant outcome of the new tax reform is that India will emerges as a unified tax regime for traded in goods and services. With the phasing out of tax restrictions on interstate movement of goods, the GST is going to positively contribute to economic activities.