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Cabinet to take up GST ConstitutionAmendment Bill tomorrow

New Delhi, Mar 14 (PTI) The Union Cabinet is likely to tomorrow consider a ConstitutionAmendment Bill to pave the way for implementation of Goods and Services Tax, a new indirect

tax regime that will subsume various levies like excise and service tax.

According to sources, Cabinet will consider the GST Constitution Amendment Bill tomorrow. After

that, it will be introduced in the current session of Parliament.

The Finance Ministry has worked on the final draft Amendment Bill - the fourth since the

discussions on the new tax regime started.

Earlier, the first three drafts prepared by the Centre were rejected by the states, citing autonomy

issues.

The fourth draft, a hybrid of the second and third draft, has proposed that the GST council for

taking decisions on all important matters will be formed through a presidential order.

In addition, the composition of the GST Dispute Resolution Authority, proposed to be a part ofthe Constitution Amendment, will be decided by Parliament.

Furthermore, petroleum, natural gas, diesel and ATF have been kept out of the GST ambit in the

final draft.

Last year, a draft Constitution Bill proposed by the Centre to the states had suggested a council

chaired by the Union Finance Minister, with states as members, to make changes in GST.

The states, especially NDA-ruled ones, had raised objections to the proposal, saying it would

give veto power to the Union Finance Minister over state taxation issues.

The Centre subsequently provided another draft to states, suggesting that changes in GST could

be made only if there was a consensus on those issues in the council. However, some state

finance ministers did not agree to even this suggestion.

Taking into consideration the states'' concerns, the Finance Ministry had floated a third draft onthe GST Constitution Amendment Bill.

The new draft proposed to create a GST Council through an Act of Parliament, instead of a

presidential order, as proposed in the previous draft. The Centre had also dropped any reference

to the Union Finance Minister heading the GST Council.

After missing the original April, 2010, deadline for GST rollout, the government proposed to

introduce it in April, 2011. But it is all set to miss this deadline too. According to Revenue

Secretary Sunil Mitra, it may be difficult to implement GST from April 1, 2012, too.

The GST will subsume indirect taxes like excise duty and service tax at the central level and VAT

on the states front, besides local levies.

Govt moves Constitution Amendment Bill for GSTBs Reporter / New Delhi March 23, 2011, 0:41 IST

The government on Tuesday inched a step closer to the introduction of the Goods and Services Tax (GST) bytabling a Constitution Amendment Bill in Parliament that seeks to provide powers to the Centre and states tomake laws for levying tax on supply of goods and services. Now, states are not allowed to tax services, while theCentre cannot tax sale of goods.

GST would replace a number of indirect taxes levied by the Centre and state governments,and was intended to remove cascading of taxes and provide a common national market forgoods and services, said the Constitution (One Hundred and Fifteenth Amendment) Bill,

2011.

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GST will subsume many taxes levied at the Centre, including excise duty, additional excise duties, excise dutylevied under the Medicinal and Toilet Preparations (Excise Duties) Act, 1955, service tax, additional customsduty, special additional duty, central surcharges and cesses (excluding those applicable to income tax).

At the state level, it will subsume state value added tax/sales tax, entertainment tax (unless levied by localbodies), luxury tax, taxes on lottery, betting and gambling, tax on advertisements, state cesses and surchargesand entry tax, not levied by local bodies.

MAIN POINTSCONSTITUTION (115th AMENDMENT) BILL PROPOSES...

* Simultaneous power to be conferred upon Parliament and statelegislatures to make laws on GST

* President to constitute a GST Council to be headed by financeminister with members from states

* Council to make recommendations the taxes to be levied, goodsto be exempted, GST rate

* Establishment of a GST Dispute Settlement Authority toadjudicate any dispute or complaint

It proposes to keep crude petroleum, diesel, petrol, aviation turbine fuel, natural gas and alcohol for humanconsumption outside the purview of GST. States will be allowed to levy tax on inter-state movement of thesegoods.

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GST Bill a sub-optimal outcomeSatya Poddar / March 23, 2011, 0:45 IST

The tabling of the Constitution (Amendment) Bill in Parliament is a step forward in the Governments agenda forimplementation of the Goods and Services Tax (GST). However, the GST model conceived in the Bill isnt theone industry was clamouring for. It is not the flawless GST the 13th Finance Commission had recommended. It isa Bill on which several Cabinet ministers had expressed concerns. The Planning Commission also had significantreservations.

However, the finance minister is in a hurry and does not want to lose any more time. He recognises flaws in theGST model proposed in the Bill, but has not been successful in persuading the Empowered Committee of StateFinance Ministers (ECSFM) to look beyond their self interests. In many ways, the model is contrary to theinterests of individual states. This is a clear case of revenue-maximising behaviour of individual states leading toa sub-optimal outcome for the group as a whole. Many states admit the outcome is unappetising and sure tocause indigestion.

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The main flaw of the Bill is that it excludes important sectors from the GST ambit. Sectors such as petroleum,natural gas, real estate and alcohol are proposed to be kept outside the GST domain. Even for electricity, whilethe Bill is silent, indications are that it would also be kept outside the GST scope. The States have indicatedtheyd continue to levy electricity duty, which would preclude application of GST.

Keeping the core sectors out of the GST domain would have serious implications for the industry. These sectorsare the foundation of all commercial and industrial activity and their exclusion would result in considerablecascading of taxes. The cascading in petroleum sector alone is estimated to be Rs 35,000 crore per annum!Since the exclusion is provided in the Constitution itself, it precludes any future move to include them into GST.Exclusion of these sectors serves no social, economic or fiscal policy objectives.

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The second major flaw is that certain distortionary taxes such as the entry tax and octroi, and the entertainmenttax, would be kept alive to the extent levied and collected by a panchayat or municipality. Continuation of theselevies outside the GST would perpetuate problems in the existing structure and be a hurdle in attaining thesimplicity and efficiency that GST seeks to achieve.

Flawed strategyWhere did things go wrong? Perhaps the Government aimed too high in asking for a uniform GST in all states.

Ideally, the Constitution should have been amended only to empower the Centre and the States to levy GST in acomprehensive manner on all supplies, including real property. Any exclusions from the base should have beenleft to be dealt with in the GST legislation.

Further, rather than asking all states to follow a common model, the Government could have created acomprehensive model, allowing states to opt in, as under the Canadian model.

Given the state of affairs, the tabling of the Bill in Parliament, to be referred to a Standing Committee thereafter,is a significant development in that it would allow a fresh opportunity to carry forward the GST discussions. TheECSFM forum has not allowed meaningful discussions and completely ignored the industrys views, making theconsultative process lopsided. It is strange that the Empowered Committee did not see fit to allow any industrygroup to make a presentation on the subject.

Never before has there been such a clamour for a comprehensive GST to be introduced. A good reform hasbeen hamstrung not because of taxpayers, but because of the narrow vision of governments. The industry andthe government have now pinned their hopes on the parliamentary committee to salvage the GST.

(The writer is tax partner, Ernst & Young. The views are personal)

Govt introduces Constitution Bill in Lok Sabha for GSTPress Trust of India / New Delhi March 22, 2011, 11:09 IST

The government today introduced a Constitution Amendment Bill in the Lok Sabha

to facilitate implementation of the Goods and Service Tax (GST), an indirect taxregime that would subsume levies like excise, service tax and sales tax.

The Bill, introduced by Finance Minister Pranab Mukherjee seeks to amend theconstitution with a view to confer simultaneous powers on centre and states to levytaxes on goods and services.

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"The GST would replace a number of indirect taxes presently being levied by the central government andthe state governments and is intended to remove cascading of taxes and provide a common nationalmarket for goods and services," said the statement of objects and reasons of the Bill.

The Bill provides for creation of a GST Council to be headed by Union Finance Minister. The Council willbe empowered to recommend tax rates and exemption and threshold limits for good and services.

Besides, the Bill proposed a GST Dispute Settlement Authority to deal with grievances of the centre andthe state with regard to GST.

The GST, which is considered to be a major tax reform, has been pending for the last four years due to

differences between centre and some states over the structure of the new tax regime.GSTConstitution Amendment Bill OK'dAgencies

Posted: Tuesday, Mar 15, 2011 at 1731 hrs ISTTags:Constitution Amendment Bill Approved|Union Cabinet|Goods And Services Tax Implementation|GST|

Indirect Tax Regime

New Delhi: The Union Cabinet today approved Constitution Amendment Bill to pave the way for implementationof Goods and Services Tax, a new indirect tax regime that will subsume various levies such as excise andservice tax.

According to sources, the Cabinet has cleared the Bill but there are certain changes which the Law Ministry hasbeen asked to do. Now, the government would push to table it in Parliament.

"It has been approved. We will try to introduce it in Parliament," a minister said.

The Finance Ministry has worked on the final draft Amendment Bill, the fourth since the discussions on the newtax regime started.

Earlier, the first three drafts prepared by the Centre were rejected by the states citing autonomy issues.

The fourth draft, a hybrid of the second and third draft, has proposed that the GST council for taking decisions onall important matters will be formed through a presidential order.

In addition, the composition of the GST Dispute Resolution Authority, proposed to be a part of the ConstitutionAmendment, will be decided by Parliament.

Furthermore, petroleum, natural gas, diesel and ATF have been kept out of the GST ambit in the final draft.

Last year, a draft Constitution Bill proposed by the Centre to the states had suggested a council chaired by theUnion Finance Minister, with states as members, to make changes in GST.

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The states, especially NDA-ruled ones, had raised objections to the proposal, saying it would give veto power tothe Union Finance Minister over state taxation issues.

The Centre subsequently provided another draft to states, suggesting that changes in GST could be made only ifthere was a consensus on those issues in the council. However, some state finance ministers did not agree toeven this suggestion.

Taking into consideration the states' concerns, the Finance Ministry had floated a third draft on the GSTConstitution Amendment Bill.

The new draft proposed to create a GST Council through an Act of Parliament, instead of a presidential order, asproposed in the previous draft. The Centre had also dropped any reference to the Union Finance Ministerheading the GST Council.

After missing the original April, 2010 deadline for GST rollout, the government proposed to introduce it in April,2011. But it is all set to miss this deadline too. According to Revenue Secretary Sunil Mitra, it may be difficult toimplement GST from April 1, 2012, too.

The GST will subsume indirect taxes such as excise duty and service tax at the central level and VAT on thestates front, besides local levies.

Cabinet clears GST Constitution Amendment

BillPTI | 03:03 PM,Mar 15,2011

New Delhi, Mar 15 (PTI) The Union Cabinet today approved Constitution Amendment Bill to pave

the way for implementation of Goods and Services Tax, a new indirect tax regime that will

subsume various levies such as excise and service tax. According to sources, the Cabinet has

cleared the Bill but there are certain changes which the Law Ministry has been asked to do. Now,

the government would push to table it in Parliament. "It has been approved. We will try tointroduce it in Parliament," a minister said. The Finance Ministry has worked on the final draft

Amendment Bill, the fourth since the discussions on the new tax regime started. Earlier, the first

three drafts prepared by the Centre were rejected by the states citing autonomy issues. The

fourth draft, a hybrid of the second and third draft, has proposed that the GST council for taking

decisions on all important matters will be formed through a presidential order. In addition, the

composition of the GST Dispute Resolution Authority, proposed to be a part of the Constitution

Amendment, will be decided by Parliament. Furthermore, petroleum, natural gas, diesel and ATF

have been kept out of the GST ambit in the final draft. Last year, a draft Constitution Bill

proposed by the Centre to the states had suggested a council chaired by the Union Finance

Minister, with states as members, to make changes in GST. The states, especially NDA-ruledones, had raised objections to the proposal, saying it would give veto power to the Union Finance

Minister over state taxation issues. The Centre subsequently provided another draft to states,

suggesting that changes in GST could be made only if there was a consensus on those issues in

the council. However, some state finance ministers did not agree to even this suggestion. Taking

into consideration the states' concerns, the Finance Ministry had floated a third draft on the GST

Constitution Amendment Bill. The new draft proposed to create a GST Council through an Act of

Parliament, instead of a presidential order, as proposed in the previous draft. The Centre had

also dropped any reference to the Union Finance Minister heading the GST Council. After

missing the original April, 2010 deadline for GST rollout, the government proposed to introduce it

in April, 2011. But it is all set to miss this deadline too. According to Revenue Secretary SunilMitra, it may be difficult to implement GST from April 1, 2012, too. The GST will subsume indirect

8/3/2019 GST Constitutional Amendment

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taxes such as excise duty and service tax at the central level and VAT on the states front,

besides local levies.

GST net: Alcohol out, but print media in; petroleum products too excluded

New Delhi, March 22:

The Finance Minister, Mr Pranab Mukherjee, has decided to specifically exclude alcohol (for

human consumption only) from the GST net, but include print media in it.

He also wanted natural gas, diesel, petrol, crude oil and Aviation Turbine Fuel (ATF) to be

excluded.

These proposals are contained in the Constitutional (115th Amendment) Bill 2011 that seeks

to facilitate dual Goods and Services Tax (GST) system. This Bill was introduced by Mr

Mukherjee in Lok Sabha on Tuesday.

By specifically mentioning the exclusion or inclusion of these items under the GST net at the

level of the Constitutional Amendment Bill itself, the Centre seeks to ensure that the

proposed Goods and Service Tax Council (GST Council) would not have any room to make

recommendations on these items, say Constitutional and tax experts.

With tobacco and tobacco products not specifically excluded from the GST net at the

Constitutional amendment Bill level, there is a possibility of GST being levied on these

items, according to tax experts. The Constitutional amendment Bill retains tobacco and

tobacco products in the Union List for excise duty purposes.

The specific exclusion of natural gas, petrol, high speed diesel, crude petrol, alcohol for

human consumption and ATF from GST will come as good news for most States as they

want to retain fiscal autonomy over these items through levy of sales tax and State-level

excise duty (alcohol).

This may, however, not be to the liking of the industry which wanted crude and petroleum

products to come under the GST net.

Meanwhile, the passage of the Constitutional amendment Bill may not be all that difficult

given that the Centre has climbed down on most of the contentious proposals relating to the

GST council and also on the GST Settlement Authority.

Putting to rest concerns that Union Finance Minister will have veto power on GST rates, theConstitutional Amendment Bill states that every decision of the GST council taken at a

meeting shall be with the consensus of all the members present at the meeting.

The GST Council will be set up through a Presidential order and the Union Finance Minister

will be the Chairperson.

Besides the Minister of State for Finance in charge of revenue, the other members of the

Council are the Minister in charge of Finance or taxation or any other minister nominated by

each State Government.

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GST in Parliament: Now, will it be rolled

out in April '12?

Published on Tue, Mar 22, 2011 at 21:21 | Updated at Wed, Mar 23, 2011 at 10:41 |Source : CNBC-TV18

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In the first step to the roll-out of the country's largest

indirect tax reform, the constitutional amendment bill for

Goods and Services Tax (GST) was tabled in Parliament

today. The Bill was tabled despite opposition, mainly from

BJP-ruled states, and is now, likely to be referred to the

Parliamentary Standing Committee for scrutiny.

In an interview with CNBC-TV18s Siddharth Zarabi, Satya

Poddar, Ernst & Young, discusses the impact of the move.

Here is a verbatim transcript of the exclusive interview

with Satya Poddar on CNBC-TV18. Also watch the

accompanying video.

Q: Despite the GST constitutional amendment finally being tabled in the

Parliament today, do you expect the tax to be rolled out from April 2012 or even

perhaps June 2012?

A: June is more realistic than April. A lot will depend upon how speedily Parliamentary

Committee sends its recommendations to Parliament. Expectation is that the Bill will be

referred to the Standing Committee of Parliament chaired by Mr Yashwant Sinha and the

earliest they will report back is October. If they can report back to Parliament by October

then there is a realistic chance of the GST law to be enacted by June 2012. But not

before that.

Q: One of the concerns that is emerging and this has to do with the politics of the

situation at the Center and in Parliament specifically. It is clear that political

relationships between the ruling party and the leading opposition have taken a

turn for the worse. It was perhaps unprecedented in recent years that the principal

opposition walks out during a debate on the Finance Bill. Given this background

and the acrimony, do you seriously expect that the Standing Committee, which is

headed by BJP MP, would sort of be willing to except and go ahead with what the

Excerpts from What's Hot on

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government is proposing, especially given the concern among BJP states about

the loss of financial autonomy?

A: Things have really unfolded in almost completely unpredictable manner over the past

few months. It will be futile and sort of presumptive for me to speculate how they unfold

over the next few months.

Good news is that the BJP party, particularly the leadership at the national level has

been supportive of the GST. Infact it was one of the items in their political manifesto in

the last elections to introduce the GST. So, there their opposition is muted.

The business community almost unanimously wants GST. BJP is not likely to ignore

those desires of the business community. It is good for the tax payers, good for the

economy. But at the same time, politically they may well decide to not cooperate with the

government, but only time will tell how the debate unfolds.

Q: We are now talking about the specifics of the amendment as has been

introduced in Parliament. Now the key feature is that it proposes the setting up of

a council with various features, powers etc. But the key thing is that this will only

be recommendatory in nature, unlike in the past as was suggested, the GST

council will not have sort of a decisive final say on this matter. So, how will

therefore rate discipline be maintained? Clearly that is the biggest fear. You

cannot have one particular state sort of going unilaterally on its own path,

abjuring the consensus. So, now if the council is only recommendatory, how

much of a fear does a tax expert like you have on that front?

A: I believe that once the GST is implemented, and it is implemented, according to the

model law, which is meant to be uniform across the states, then the things will not be as

disruptive as governments fear today or the politicians fear today. The model law will

specify uniform base across the states. There will be a dispute sort of settlement

authority in case the states deviate from the common rates structure. And that rates

structure does lead to some losses in revenues to other states, then the disputes of

settlement authority will have the power to intervene.

So, my own sense is that those things are not worrisome as long as the GST is launched

in a uniform manner across the states. And the very fact that the settlement authority will

be there, that will act as enough of a deterrent for the states to deviate from the model.

Q: By leaving out items like petroleum, alcohol from the GST net, what are we really

doing with this? Clearly, the effect of cascading taxes and all this sort of multiple levies

that we have, that is not going to go away with GST. So, why even have it?

A: Absolutely right. In fact this is the biggest flaw of what has been tabled in Parliament. In

my view, the constitutional provision could have only dealt with empowerment of the two

levels of the governments, Central and the states to levy the GST tax. And anything to be left

out, could have been discussed in the context of the GST legislation. But to enshrine that

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exclusion of certain sectors in the constitution makes the constitutional provision flawed and

the eventual GST will obviously be flawed.

And the sectors, which are left out, are so fundamental, the amount of cascading they will

perpetuate is not trivial. In fact all of the gains from the GST would be nullified, if all these

sectors are left out. If petroleum, natural gas, electricity, alcohol, these are not trivial sectors,and the real property.

So, if you leave out these six-seven sectors, half of the economy is outside the GST net. So,

what is the point of it all? So, I do hope that the Parliamentary Committee will take a serious

look at the constitutional provisions and hopefully recommends significant changes in the

constitutional bills. So, these excluded sectors are put back in the constitution, within the

scope of the GST

FM moves GST bill in LS despite lack of

consensus

TNN, Mar 23, 2011, 03.16am IST

Tags:

Pranab Mukherjee

NEW DELHI: Finance ministerPranab Mukherjeeon Tuesday set the stage for the

introduction of the Goods and Services Tax (GST)the most ambitious tax reform proposal

in recent yearseven as several states said that common ground was yet to be reached.

The indirect tax reforms are aimed at streamlining the movement of goods acrossIndiawith a

single tax structure by abolishing the current multiple tax system comprising central excise,

state VAT and service tax, which add up to over 30%. The GST was scheduled to be

introduced from April 2010. However, the Centre failed to build a consensus with

Opposition-ruled states.

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The GST will not cover petroleum products and alcohol but will allow the Centre to levy

taxes on supply of goods in inter-state trade. In case of all other goods and services, there will

be separate levies for the Centre and the states, which together would add up to 16%.

Mukherjee moved a Constitution Amendment Bill in Lok Sabha, which among other things,

provides for the constitution of a GST Council consisting of the finance minister as chairman,

and a vice-chairman to be elected from among the FMs of states, who will be members of thecouncil. The Union minister of state for revenue will also be a member of the council.

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8/3/2019 GST Constitutional Amendment

11/12

UPA gets moving

on reforms

New Bills will allow amendment to the

Constitution to pave way for GST, banking and pension reforms

Sanjiv Shankaran & Liz Mathew

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New Delhi: Finance minister Pranab Mukherjee on Tuesday pushed ahead with the United Progressive

Alliance (UPA) governments economic reforms agenda by introducing new legislation on banking and

indirect tax even though the government is under pressure in Parliament on account of political

controversies.

Legislation to reform banking and a Bill to amend the Constitution to facilitate goods and services tax

(GST) were introduced in the Lok Sabha on Tuesday, both budget promises. They will be followed by

more Bills to reform pension and bring some more areas of banking and financial services in line with

requirements, the minister said in the Lok Sabha.

The developments came in the wake of the UPA being subject to pressure in Parliament on account of

recent political controversies, which could make it more challenging for the government to drum up

support for the legislation. The UPA, which could not transact any major legislative business during the

winter session due to a belligerent opposition, has had to cut short the budget session. Both Houses of

Parliament are to be adjourned until further notice on 25 March. The budget session was initially

scheduled to go for a three-week recess on 16 March before reconvening from 4-21 April.

The confidence really stems from the fact that the national interest is above politics, said Manish

Tewari, Congress party spokesperson. It is important to harmonize your tariff regime with the global

tariff. These are issues above politics. I hope the opposition would heed this imperative and will not hold

it ransom to partisan politics.

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8/3/2019 GST Constitutional Amendment

12/12

The government has to show determination, said Balveer Arora, former head of the political science

department at Jawaharlal Nehru University, on the UPAs decision to press ahead with economic reforms.

It cannot be seen as lacking will and determination, especially at a time it is gearing up to crucial state

elections, he said. But (whether) the firmness and the will it shows will yield results has to be seen.

The banking reforms Bill was introduced almost six years after the UPA unsuccessfully tried to push it

through Parliament in its first stint in power from 2004-09.

The highlights of Tuesdays banking Bill are that it arms the Reserve Bank of India (RBI) with the extra

powers it wants to allow industrial groups to float banks (Mint, 3 March). The Bill gives RBI the power to

supersede a banks governing board for up to a year, ask for financial and other details from associate

companies of banks, and also insulates the banking sector from the provisions of the Competition Act

and the Competition Commission of India. RBIs absolute powers over banks has been insulated from

any other legislation or regulator.

Other than empowering RBI to deal with an expansion of the banking industry, Tuesdays Bill also allows

banks to issue more instruments to raise capital and brings voting rights in private banks in line with

shareholding. In nationalized banks, the maximum permissible voting rights have been enhanced to

10% from the current ceiling of 1%.

Reforms in the financial sector were supplemented by a new initiative to break the deadlock between the

Centre and the states in GST negotiations. The constitutional amendment Bill on GST introduced on

Tuesday proposes a flexible superstructure for GST and leaves details to be worked out at a later stage.

GST aims to build a common market in India by scrapping tax barriers between states. The introduction

of GST is expected to bring about a more competitive business environment and eventually lower prices

for consumers.

An important outcome of Tuesdays Bill on GST is that some of the people engaged in the deadlocked

negotiations are bound to change.

The constructive thing is the shift in the forum for debate on GST to a parliamentary standing

committee from the empowered committee of state finance ministers, said Satya Poddar, partner at

audit and consulting firm Ernst and Young Pvt. Ltd. The empowered committee had become

dysfunctional.

Ultimately, it is just tabling of the Bill. It will go to the standing committee, where a consensus could be

hammered out. A lot of differences will get ironed out there, Tewari said.

The GST Bill kept alcohol and petroleum derivatives such as diesel and natural gas out of the purview of

GST. In addition, the Bill tried to offset states fears of losing fiscal autonomy by adding a provision that

the top decision-making body would take a consensus approach. In its first draft of the Bill given to

states in 2010, the Centre gave the Union finance minister special power to veto decisions of the GST

council, the top decision-making body.