New Delhi, June 30:
President Pranab Mukherjee and Prime Minister Narendra Modi today jointly launched the new indirect tax regime Goods and Services Tax (GST), ushering a new era of ‘One Nation-One Tax’ in the Indian economy.
At the stroke of the midnight, India entered into the much awaited and talked about ‘One nation-One tax’ Goods and Services Tax (GST) regime.
The biggest ever tax reform GST, is expected to rewrite the rules of business, while reducing the burden on the common man. It will integrate India into a common market, bigger than the European Union. It is expected that by doing away with the plethora of taxes and barriers on state borders, GST will accelerate economic growth.
It will enable companies and firms to maintain electronic accounts, along with invoices. GST would ensure seamless and uniform indirect tax regime besides lowering inflation and promoting growth in the long run as he sought to allay concerns of the states that they would be hurt by its implementation.
GST is a comprehensive indirect tax levy on manufacture, sale and consumption of goods as well as services at the national level. It will replace all indirect taxes levied on goods and services by the Indian Central and State governments.
It is aimed at being comprehensive for most goods and services. It would mitigate cascading or double taxation in a major way and pave the way for a common national market. Introduction of GST would also make products competitive in the domestic and international markets. GST is having transparent character and it would be easier to administer.
The roll out of the GST was never an easy affair for the governments. On 6th May 2015, the Lok Sabha passed the much-delayed Constitutional Amendment Bill to introduce Goods and Service Tax (GST), paving the way for a new bill on the uniform tax regime, even as the Congress Party staged a walkout in protest.
Calling the GST a “disruptive change”, President Pranab Mukherjee tonight said the ambitious central tax is a “tribute” to the maturity and wisdom of India’s democracy, as he recalled steps taken during his own tenure as Finance Minister on this key reform measure.
He also said the GST Council should continuously review the implementation and suggest suitable improvements to the new indirect taxation regime.
“The new era in taxation, which we are about to initiate in a few minutes, is the result of a broad consensus arrived at between the Centre and states,” Mukherjee said in his speech at a special function in the Central Hall of Parliament.
“This consensus took not only time but also effort to build. The effort came from persons across the political spectrum who set aside narrow partisan considerations and put the nation’s interests first. It is a tribute to the maturity and wisdom of India’s democracy,” he said.
The President termed the Goods and Service Tax (GST) a disruptive change.
“It is also a moment of some satisfaction for me because, as the Finance Minister, I had introduced the Constitution Amendment Bill on March 22, 2011,” he said.
“It is similar to the introduction of VAT when there was initial resistance. When a change of this magnitude is undertaken, however positive it may be, there are bound to be some teething troubles and difficulties in the initial stages,” he said.
Mukherjee said these issues have to be solved with understanding and speed to ensure that they do not impact the growth momentum of the economy.
“Success of such major changes always depends on their effective implementation. In the months to come, based on the experience of actual implementation, the GST Council and the Central and state governments should continuously review the design and make improvements, in the same constructive spirit as has been displayed till now,” he said.
The President said the GST will “also make our exports more competitive and also provide a level playing field to domestic industry to compete with imports.”
“Currently due to cascading, our exports still carry some embedded taxes, making them less competitive.
“Similarly, the hidden effect of cascading means that the total tax incidence on domestic industry is not transparent,” he said.
Under GST, Mukherjee said the tax incidence will be transparent, enabling full removal of tax burden on exports and full incidence of domestic taxes on imports.
By creating a unified common national market, the GST will act as a major boost to economic efficiency, tax compliance and domestic and foreign investment, the President said.
Mukherjee recalled the proposal to introduce GST was first mooted in the Budget Speech for the financial year 2006 -07.
Observing that the GST will be administered through a modern world-class information technology system, he also recalled that in July 2010, he had set up an Empowered Group for development of IT systems required for the GST regime under the chairmanship of Nandan Nilekani.
He further said, “It is also a moment of some satisfaction for me because as the Finance Minister, I had introduced the Constitution Amendment Bill on March 22, 2011.
“I was closely involved in the design and implementation and had the occasion to meet the Empowered Committee of state finance ministers, formally and informally, as many as 16 times.
“I also met the Chief Ministers of Gujarat, Bihar, Andhra Pradesh and Maharashtra a number of times. I have a vivid recollection of those meetings and the various matters that were raised,” Mukherjee said.
He observed that given the magnitude of the task, it was not a surprise that there were many contentious issues.
“Yet, I found both in those meetings and in my many interactions with Chief Ministers, Finance Ministers and officers of states, that most of them had a constructive approach and an underlying commitment to the introduction of GST.
The President said his confidence stood justified when on September 8, 2016, after the Bill was passed by both Houses of Parliament and more than 50 per cent of State Legislatures, he had the privilege of giving assent to the Constitution (One Hundred and First Amendment) Act.
The President further said, “As we usher in the creation of one nation, one tax, one market, let me conclude by calling upon every Indian to extend cooperation in the successful implementation of the new system.”
Prime Minister Narendra Modi termed the GST as a ‘good and simple tax’ which will end harassment of traders and small businesses while integrating India into one market with one tax rate.
At a gala event to launch the GST at the historic Central Hall of Parliament, Modi said the indirect tax reform is a result of combined efforts of various political parties at different points of time.
GST, he said, is an example of cooperative federalism as the centre and states together thrashed out the new law with consensus.
Besides being a transparent and fair system that will end generation of black money and corruption, GST will promote new governance culture that will end harassment at the hand of tax officials.
Touching upon initial teething troubles that may be witnessed because of unification of more than a dozen central and state levies into one and switching over to a new online return filing system, Prime Minister said even eyes have to adjust for a couple of days when a sight corrective spectacles are worn.
Modi said GST will eliminate the compounding effects of multi-layered tax system.
Finance Minister Arun Jaitley said rollout of the GST will ease inflation, make tax avoidance difficult and boost GDP growth.
Addressing the midnight launch event of the GST in the Central Hall of Parliament, Jaitley said the implementation of the landmark unified tax should be seen as the beginning of a new journey that will expand the country’s economic horizon.
He further said that 17 transaction taxes in states and centre and 23 cesses would be subsumed in GST. An assessee will have to file only one return.
“Inflation will come down, tax avoidance will be difficult, India’s GDP will be benefited and extra resources will be used for welfare of poor and weaker section,” Jaitley said.
India is making history with the launch of GST, which is the biggest and most ambitious tax and economic reform in its history, the finance minister said.
“The old India was economically fragmented. New India will create one tax, one market, one nation. It will be in India where Centre and states work together towards the common goal of shared prosperity,” Jaitley said.
Terming GST as an important achievement for the country, he said not only will India write a new destiny, the new tax regime would also strengthen federalism.
“The Constitution says India is a union of states. The union is strong if both Centre and states are strong. That is the real meaning of cooperative federalism.
“While enacting the GST, neither the states nor Centre gave up their sovereignty. They have pooled their sovereignty to make joint decisions in indirect taxation,” the finance minister said.
In a large and complex federal system of multi-party democracy with Centre and 29 states and 2 UTs, Jaitley said India has implemented a constitutional amendment and brought in a large tax reform.
“We have done this at a time when world is facing a slow growth, isolationism and lack of structural reforms. With the GST, India has showed that these forces can be overcome through display of inclusion, openness and boldness,” he said.
He appreciated the efforts of all members of parliament, state finance ministers and officials in making GST a reality when many had expressed doubts whether it could be implemented from July 1.
Jaitley also recalled the initiatives taken by his predecessors, including the then Finance Minister Pranab Mukherjee.
He recalled the contribution of former finance Yashwant Sinha and former economic affairs secretary Vijay Kelkar.
“All decisions of GST Council were taken uninamously…We did not want to burden common man and weaker section,” Jaitley said.
Meanwhile, the Opposition tonight stood as a divided house as the JD(U), the NCP, the BJD, the Samajwadi Party and Janata Dal (S) participated in the midnight launch of the GST, which was boycotted by the Congress, the Trinamool Congress, the Left and some other parties.
Ruptures in the opposition unity emerged barely a week after 17 parties joined hands to put up a joint candidate against the ruling NDA nominee for the July 17 presidential election.
The Congress, the Trinamool Congress, the Left, the BSP, the DMK, the RJD and some other parties boycotted the event, dubbing it as a “tamasha” (drama).
The NCP, a key constituent of the Congress-led UPA, broke away from the Opposition ranks, with its chief Sharad Pawar along with Praful Patel and Tariq Anwar attending the event in the Central Hall of Parliament.
Anwar said his party was attending the GST launch as it had supported the legislation on ushering in the new indirect tax regime in the country.
“We agree with the Congress to an extent, but we supported the legislation when it was introduced (in Parliament and state assemblies). The party has hence decided to attend the midnight meeting,” he said.
JD(S) supremo and former Prime Minister H D Deve Gowda also attended the programme, sharing the dais with President Pranab Mukherjee, Vice President Hamid Ansari, Prime Minister Narendra Modi, Lok Sabha Speaker Sumitra Mahajan and Finance Minister Arun Jaitley.
According to Congress sources, Gowda was requested by a senior party leader not to attend the programme but he did not heed to it.
Yesterday, JD(S) general secretary Danish Ali had said that Gowda had been invited in the capacity of former prime minister to share the dais with the President and the party had decided that he would attend the event.
The JD(S) criticised the Congress for not consulting it before taking the decision to boycott the function.
The SP, which had initially announced the boycott, did a somersault by attending the event, saying it found no problem when the party had supported the GST bill in Parliament.
“When we supported the bill in Parliament, then why would we not attend this function to launch GST? Both the BJP and the Congress had also supported the passage of the bill,” said Ram Gopal Yadav, who was accompanied by Naresh Agrawal.
Leaders of the JD(U), the BJD and the AIADMK also attended the function.
The Congress, however, downplayed the cracks within the opposition ranks, terming it as a “one-off” development.
A senior Congress leader claimed that the opposition unity will remain intact during the 2019 Lok Sabha election.
The function was attended by the union ministers, MPs as well as chief ministers and finance ministers of several states.
BJP chief Amit Shah, party stalwart L K Advani and former finance minister Yashwant Sinha were among the other prominent political leaders who attended the function. (PTI)
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