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In a historic breakthrough, the Constitution (One Hundred and Twenty Second Amendment) Bill, 2014 (‘GST Bill’) has been passed unanimously by the Rajya Sabha of the Parliament. This is a significant step and takes the country closer to Goods and Services Tax (GST).

The GST Bill was introduced in the Lok Sabha on December 19, 2014, and was passed by the Lok Sabha on May 6, 2015. It was then referred to the Select Committee of Rajya Sabha, which submitted its report on July 22, 2015. The demand of the Congress party for introducing a cap of 18% on the rates in the GST Bill was not accepted and, the GST Bill has come to be passed by the Rajya Sabha, with the following amendments:

  • The provision enabling the levy of 1% Additional Tax on inter-state transactions has been deleted
  • Centre is to compensate the States for deficits for a period up to five years
  • States’ share of the IGST shall not form a part of the Consolidated fund of India
  • The GST Council is to establish a mechanism to adjudicate disputes between the Central Government and one or more States or dispute between two or more States. [The GST Council is tasked with making recommendations on key aspects: GST rates, threshold limits, exemptions, etc.]

Next steps for GST

  • Lok Sabha has to pass the amended GST Bill
  • The GST Bill has to then be ratified by at least 50% of the State legislatures. Per the statement of the Hon’ble Revenue Secretary today, the Government is hopeful of this being achieved in the 30 days time
  • GST Bill is to then receive the Presidential assent
  • GST Council is to be formed within 60 days of Presidential assent
  • Thereafter, GST legislations have to be enacted. While the draft of Model GST Law has been circulated, these legislations will have to be finalized and thereafter the Centre has to enact the CGST Act and IGST Act and the State Governments will have to enact the SGST Act. The Government is hopeful that legislative process for enacting the GST legislations will be carried out in the winter session of the Parliament
  • The requisite IT infrastructure will have to be developed. The Goods and Service Tax Network (‘GSTN’) will have to be rolled out and adopted. The Hon’ble Revenue Secretary has indicated today that the GSTN and the States IT back-end will be ready by November, 2016, and testing of live transactions is proposed to be carried out by January, 2017

Certain noteworthy issues emerging, including from the Rajya Sabha debate

  • Real challenges now are in relation to the determination of rates under GST and what supplies merit exemption. The rate structure will also determine the compensation that is required to be given to the States
  • The exact structure of GST and legislations will have to be developed after consensus between the Centre, the States and the GST Council
  • The issue of dispute resolution mechanism raises substantial Constitutional issues, and how it will be seen as being compatible with Article 131 of the Constitution, which stipulates that the Hon’ble Supreme Court has supremacy to deal with issues of this nature
  • It remains to be seen whether the GST legislations will be introduced as Finance Bills (and debated by both Houses of the Parliament) or as Money Bills (and debated by only the Lok Sabha)



Yesterday, the Hon’ble Ministry of Finance also released certain FAQs on GST clarifying on various aspects. Some noteworthy aspects emerging from the FAQ include the following:

  • Cross utilization of credit of CGST and SGST between goods and services would be allowed
  • Unified application for registration and common return is to be filed for both CGST and SGST



The most important hurdle in the rollout for GST has been crossed last night - GST was first contemplated by the Kelkar Task Force on indirect taxes in 2003. The Government, and as is seen in the FAQs and the Hon’ble Revenue Secretary’s statements, is taking several measures to ensure that it rolls out GST, preferably by April, 2017. Given that about eight months are left before this timeline, it is crucial and imperative for the assessees to soonest take steps to be GST ready, including in respect of software infrastructure, accounting systems, training of personnel and suppliers/vendors, etc. and gearing up for the transition.


Disclaimer: The information provided in this update is intended for informational purposes only and does not constitute legal opinion or advice. Readers are requested to seek formal legal advice prior to acting upon any of the information provided herein. This update is not intended to address the circumstances of any particular individual or corporate body. There can be no assurance that the judicial/ quasi judicial authorities may not take a position contrary to the views mentioned herein. Should you have any questions, feel free to reach out to us.


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