Union Cabinet clears changes to GST Bill, drops 1% additional tax on inter-state sales

It decided that any dispute between states and the Centre will be adjudicated by the GST Council, which will have representation from both the Centre and states.

Created On: Jul 28, 2016 15:15 ISTModified On: Jul 28, 2016 15:06 IST

The Union Cabinet on 27 July 2016 cleared changes to the Goods and Services Tax (GST) Constitutional Amendment Bill.

The changes include dropping 1 percent manufacturing tax and providing guarantee to compensate states for any revenue loss in the first five years of rollout of the proposed indirect tax regime.

It decided that any dispute between states and the Centre will be adjudicated by the GST Council, which will have representation from both the Centre and states.

The existing bill provides that the centre will give 100 percent compensation to states for first three years, 75 per cent and 50 per cent for the next two years.

Recommendation of the Rajya Sabha

Earlier, the Select Committee of the Rajya Sabha in its report recommended 100 percent compensation for probable loss of revenue for five years. As per the amendments, the Centre will now constitutionally guarantee States any loss of revenue from the GST subsuming all indirect taxes, including VAT, in the first five years of introduction.


Omission of the 1 percent inter-state tax over and above the GST rate is one of the three key demands over which the main opposition Congress, the government hopes that the long-pending GST Bill will pass in the Parliament during the ongoing monsoon session, which ends on 12 August 2016. 

Congress has been blocking the bill in Rajya Sabha due to three key demands. The other demands include GST rate in the statute and Supreme Court judge-headed dispute resolution body.

Other Cabinet decisions include

• The Cabinet decided to abolish existing guidelines for establishment of Joint Venture Companies by Defence Public Sector Undertakings, DPSUs. These guidelines which were notified in February of 2012 will not be required for a separate joint venture for DPSUs. The abolition of the guidelines will provide a level playing field between DPSUs and the private sector.

• The Cabinet gave its nod to raise foreign shareholding limit from 5 percent to 15 percent in Indian Stock Exchanges. It approved the proposal to allow foreign portfolio investors to acquire shares through initial allotment, besides secondary market, in the stock exchanges. This approval would help in enhancing global competitiveness of Indian stock exchanges by accelerating and facilitating the adoption of latest technology and global best practices. This will lead to overall growth and development of the Indian Capital Market.

• The Cabinet approved Bilateral Investment Treaty between India and Cambodia. It seeks to promote and protect investments from either country in the territory of the other country with the objective of increasing bilateral investment flows.

• The Cabinet gave its approval for setting up of new All India Institute of Medical Sciences in Bhatinda, Punjab. It will have 750 beds and incur an expenditure of 925 crore rupees. The super specialty hospital will be built under the Pradhan Mantri Swasthya Suraksha Yojana.

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एग्जाम की तैयारी के लिए ऐप पर वीकली टेस्ट लें और दूसरों के साथ प्रतिस्पर्धा करें। डाउनलोड करें करेंट अफेयर्स ऐप

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