Passage of four bills moves GST a step closer to reality

By L Badri Narayanan and Shweta Walecha, Lakshmikumaran & Sridharan

The proposed goods and services tax (GST) moved one step closer to becoming a reality on 27 March when the Lok Sabha (lower house of the parliament) approved the four bills which are intended to subsume various central and state indirect taxes and to make India a single market for goods and services. The bills were introduced as money bills, which means that approval of the Rajya Sabha (upper house) is not required for passing the bills into law.

L Badri Narayanan, Lakshmikumaran & Sridharan
L Badri Narayanan
Lakshmikumaran & Sridharan

The central GST (CGST) law will give powers to the centre to levy tax on supply of goods and/or services and will subsume various central indirect taxes. The integrated GST (IGST) law will allow the centre to tax inter-state supplies of goods and services, while the union territory GST law will allow the centre to tax supplies in union territories without legislatures. Finally, the GST compensation to states law will give legal backing to the centre to compensate a state if its revenue growth rate falls below a prescribed percentage in the first five years of the GST roll-out.

After 10 years of delays, disruptions and changes to the GST proposals, the passing of these bills means that implementing GST from 1 July 2017 has become possible.

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L Badri Narayanan is a partner and Shweta Walecha is a principal associate at Lakshmikumaran & Sridharan.

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