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Opportunity For 2% Growth In GDP Maybe Lost As GST Bill Faces New Hurdles


On Friday, select opposition parties like The Congress, AIADMK and BJD walked-out from the Lok Sabha, when Finance Minister Arun Jaitley presented the GST Bill for consideration.


Opportunity For 2% Growth In GDP Maybe Lost As GST Bill Faces New Hurdles
After lots of promises, arguments and counter arguments the Bill is slated to be in a limbo again. The real problem for the ruling NDA is that the Bill being a Constitutional Amendment Bill needs the approval of 2/3rds majority in both the houses of parliament.

The NDA barely has one thirds majority in the Rajya Sabha. Apart from this half the states need to approve the same in their respective assemblies. This is one of the most eagerly awaited Bills that over the years has never seen the light of day.

When the UPA was in power, the NDA opposed various aspects of the Bill. Now, the UPA seems to return the favour to the NDA and several regional parties have joined the fray.

So much of discussions have gone on with the states by former Finance Minister P Chidambaram and now Finance Minister Arun Jaitley one fails to realise the reason for its lack of passage.

What is The GST bill?

The GST Bill seeks to amend the Constitution and to introduce a Goods and Services Tax which will subsume various central indirect taxes, including the countervailing duty, service tax, central excise duty etc. It also subsumes octroi and entry tax, state value added tax, etc.

The idea of the GST is that it would reduce the overall tax burden of companies and hence increase their output and push GDP.

There are various estimates on how this could improve the GDP. Many suggest that it could push GDP by 2 per cent at the very least.

The initial problem with the Bill was that it was difficult to get states on board since they would lose revenues. However, the central government has time and again assured them that their losses would be compensated for.


The advantages and the drawbacks of the GST

Some of the advantages of the GST is that since it would reduce taxes it could increase output. When that happens it would push growth rates higher and also increase employment opportunities. The dis advantages of course is the fact that states would lose autonomy and GST has the potential to drive inflation higher.

Industry has all along been advocating the implementation of GST. If it is approved in the current session of parliament it can be implemented by April 1, 2016. But the political posturing at the moment suggest that it might not get through the Rajya Sabha.

Some reports suggest that there maybe a compromise, but, we have heard that so often.

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