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On 6th May, 2015, GST bill was passed in Lok Sabha.  As demanded, the bill was sent to the Rajya Sabha Select Committee headed by Shri Bhupender Yadav for review. Based on suggestions made by the Department of Revenue, State Governments, experts and other Stakeholders, the Committee suggested several amendments to the Constitution (122nd) Bill 2014 on 20th July’2015.

On 22nd July’2015, the bill won majority support of the Rajya Sabha Select Committee, marked by dissent notes from Congress, AIADMK and other left parties, which have expressed their opposition to the GST Constitution Amendment Bill in the existing form.

The details of the proposed suggestions, the accepted suggestions and the dissent notes are summarised in the table below:




Suggestions to  Constitution (122nd) Bill 2014

Suggestions adopted by Rajya Sabha Select Committee on 22nd July’2015

Dissent notes by the Congress AIADMK and left parties


Additional tax of 1% on inter-state supply of goods

1% additional tax on inter- state movement shall be removed for the benefit of manufacturing States.

The committee suggested that the levy should only on “all forms of supply made for a consideration”.

Further, committee suggested that the term “all forms of supply made for a consideration” should be defined.

The proposal to levy an additional 1% tax is market distorting.


Compensation to the states for revenue loss

100% compensation for five years is demanded for states to compensate for revenue loss. Also the compensation formula should be specified in the Bill.

  • The committee has suggested that the provision in the bill that provided Centre “may” compensate states for a period up to five years for any revenue loss is substituted by a commitment for compensation for five years.
  • GST Compensation Fund to be kept out of the purview of the Bill since it is temporary for only 5 years.
  • Compensation to be given by the Centre to the State should be deposited in a GST Compensation Fund, under the administrative control of the GST Council.
  • States should be permitted to retain 4% of Central GST element in the IGST on all inter-State supply of goods and services.


Change in the voting pattern of the States and Centre at the GST Council

  • Change in the voting pattern in the proposed GST Council is demanded.
  • Presently, it is 1:2 for Centre and States and proposed is 1: 3, thereby the powers enjoyed by the Centre shall dilute.

The representation of Centre and States in proportion 1:2 is retained.

  • Share of the States in voting in the GST Council must be enhanced to 75% and the share of the Centre brought down to 25%.
  • Further, the weightage of each State's vote should be in proportion to the representation of each State in the Council of the States.
  • The existing mechanism of Empowered Committee of State Ministers is adequate. No statutory GST Council is required.


Inclusion of products in the ambit of GST

Inclusion of tobacco and tobacco products, electricity and alcohol for human consumption within the ambit of GST is proposed.

For taxation of petroleum products, the decision of taxation shall be taken by the GST council as per the provisions of the bill.

  • Tobacco and tobacco products, alcohol for human consumption and electricity to be included in GST within a period of 5 years.
  • Petroleum and petroleum products should be totally kept outside GST.
  • States should be empowered to levy higher taxes on tobacco and tobacco products over and above State GST.


Rate of GST

Reduction in proposed rate of GST from 27% to 18 % is proposed by including the words “not exceeding 18 %” in the Bill.

  • Committee suggested that a ‘Band’ rate should be defined in the Act.
  • The states shall be given an option to levy additional tax within the band on specified goods and services.
  • Further, the Committee observed that the standard rate should be within 20%, while the lower rate should not cross 14%.

The rate of GST should be capped at 18%.


Definition of Supply in the GST Act

Clarity in the definitions of the terms ‘supplies, sales and purchase and consignment’ is demanded so as to draw distinction between them.

  • The word “supply” not required to be defined under the relevant clause as it would be defined in various GST laws relating to CGST and SGST.
  • Further, no change required in the definition of ‘Services’ as it has wide amplitude and potentially covers all supplies within its ambit.


Power to the State Governments to empower the Panchayats to impose taxes

Insertion of clauses to ensure that local bodies do not face losses due to GST. State Governments shall be given powers to empower Panchayats to impose taxes.

Adequate measures should be taken by the States to protect the flow of revenues to the Local bodies, Panchayats and Municipalities


GST Dispute Settlement Authority

  • GST Dispute Settlement Authority to be set up.
  • The Chairperson should be a person who has been a Supreme Court Judge or Chief Justice of a High Court.
  • Re-introduction of Dispute Settlement Authority through Article 279B is not warranted.
  • Provision in Article 279A empowers the GST Council to decide about the modalities to resolve disputes arising out of its recommendations.
  • GST Dispute Settlement Authority to deal with the disputes arising amongst council members should be incorporated.
  • Special consideration must be given to States like Goa and Puducherry, whose population is less than 20 lakhs.


Banking sector changes

  • Banking services shall be kept outside GST if possible.

If this is not possible, then interest, trading in securities, foreign currency and services to retail customers should not be liable to GST.

Also, suitable provisions should be made to avail CENVAT credit of input services taken to provide activities involved in such services.

  • A single registration coupled with IGST provision should be made available to enable CENVAT credit for consumers of banking services.
  • GST rate for banking industry should be kept minimum.


GST Network

Non-Government shareholding in GST network should be limited to either public sector banks or public sector financial institutions.

Post the recommendations of the Rajya Sabha Select Committee, the bill shall be placed in the Rajya Sabha, where it has to bag in votes of at least two-third members to become a landmark Act.


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