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GST bill passed in Rajya Sabha with over 2/3 majority

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Rajya Sabha

New Delhi, Aug 3 : India moved a major step closer towards a unified goods and services tax regime across the country, with the upper house of Parliament passing the relevant Constitution amendment bill on Wednesday, in what is seen as the most radical indirect tax reform since independence.

The Constitution (One Hundred and Twenty-Second Amendment) Bill, 2014 and amendments were first declared approved by a voice vote. Following a division called by Deputy Chairperson P.J. Kurien and electronic voting, it was declared approved by a two-thirds majority.

While the AIADMK had walked out earier, 203 members present voted in favour of the main bill.

The bill will now go again to the Lok Sabha for its nod since the government had moved some amendments to get political parties, notably the Congress, on board.

The passage on Wednesday was preceded by some heated debate, with the opposition demanding that subsequent bills on the subject be brought as financial bills, as opposed to money bills, so that the upper house gets a chance to debate and vote on them.

The government only assured that it will follow the spirit of the Constitution in this regard.

The new regime — the idea for which was mooted some 13 years ago — seeks to subsume all central indirect levies like excise duty, countervailing duty and service tax, as also state taxes such as value added tax, entry tax and luxury tax, to create a single, pan-India market.

Some items, notably potable alcohol and petroleum products, will be outside its purview for now.

“This is one of the most significant tax reforms in India’s history. It was, therefore, important for building a political consensus to the extent possible,” Finance Minister Arun Jaitley said, as he initiated the debate on the bill.

“The enactment of the GST Bill will bring abut the best economic management of the country as it will empower the states and increase revenue of states and the central government. It will give a boost to the economy at this critical stage,” he added.

Following the passage by the Lok Sabha, at least 50 percent of the states will have to ratify it for it to become law. This apart, while the Centre will have have to take Parliament’s nod again for its version of the GST, states too will need to do the same, which may not be a quick process.

To reach a compromise, the government had to concede to two main demands of the Congress — scrap the proposal to levy a 1 per cent additional duty so that states get compensated for at least two years and make the dispute resolution mechanism stronger and empowered.

But the third demand — of specifying the GST rate in the bill itself was not acceded.

The Congress party, nonetheless, said this was a request that remained. “Today we may not put the rate in the Constitutional amendment bill but we will have to put it in the central bill,” said P. Chidambaram, former Finance Minister and the main speaker for the Congress during the debate.

“The empowered committee is the one which arrived at a 15.5 per cent revenue neutral rate and came to the conclusion that 18 per cent should be the appropriate GST rate. The Congress did not suggest the 18 per cent rate — 18 per cent came out of your report,” he said in the Rajya Sabha.

His reference was to the committee currently chaired by West Bengal Finance Minister Amit Mitra.

“If we charge 24-26 per cent, it will defeat the very purpose of GST. Services represent 57 per cent of India’s GDP. It will be hugely inflationary. It’ll lead to evasion,” he said. “Take the case of soft drinks, whether a rich man buys it or poor man buys it, the tax is the same.”

Jaitley said since the rate is scheduled to be decided by the GST Council, which will have the representation of all states and the central government, this matter should be left to it. “We must trust the responsibility of states towards the people,” he said.

Even though the idea of a pan-India GST was first mooted in 2003, it was seven years later that a formal bill was first introduced. But this lapsed when the United Progressive Alliance (UPA) was voted out and the Prime Minister Narendra Modi government took over.

In 2014, a recast bill was introduced in the Lok Sabha on December 19, and was passed by it five months later on May 6, 2015. The bill was then referred to a Select Committee of the Rajya Sabha for examination which submitted its Report on July 22, 2015.

Following consultations, some amendments were moved and the bill sailed through in the upper house on Wednesday after nearly eight-hour debate. The final voting ended well past 9.30 p.m.

India

Journalism is a responsibility, not a tool to mislead people, says Javadekar

Javadekar said the meters installed in around 50,000 households that measure television viewership “cannot measure the opinion of 22 crore” people and “we would expand its circumference so that we know what the people watch and what they wish to watch”.

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Prakash Javadekar

“Journalism is a responsibility, not a tool to mislead people”, Union Minister of Information and Broadcasting Prakash Javadekar told students of the Indian Institute of Mass Communication (IIMC) when he virtually inaugurated the orientation programme for the academic session 2020-21.

The I&B Ministry, which overlooks the autonomous mass communication institute, said in a statement that Javadekar “advised the media students not to be trapped in sensational or TRP-centric journalism and imbibe the skills of healthy journalism ensuring that anything good happening in society should also become news”.

Javadekar said the meters installed in around 50,000 households that measure television viewership “cannot measure the opinion of 22 crore” people and “we would expand its circumference so that we know what the people watch and what they wish to watch”.

“The freedom of the press has value in democracy and it has to be preserved at any cost. But we should keep in mind that freedom comes with responsibility… you understand both the aspects of the story, but your reporting should lead society in the right direction. TRP-centric journalism is not good.”

“There is no need for any drama or sensation if your story is based on facts. There are plenty of constructive stories in society, but sadly nobody in the media has time to publish them,” he said.

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Proposal to allow corporate houses to set up banks a ‘bombshell’: Rajan, Acharya

They also said that the proposal is “best left on the shelf”.

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Ragharam Rajan Viral Acharya

The RBI working group’s proposal to allow corporate houses to set up banks is a “bombshell” and at this juncture, it is more important to stick to the tried and tested limits on involvement of business houses in the banking sector, according to an article jointly written by former RBI Governor Raghuram Rajan and ex-Deputy Governor Viral Acharya.

They also said that the proposal is “best left on the shelf”.

“The history of… connected lending is invariably disastrous — how can the bank make good loans when it is owned by the borrower? Even an independent committed regulator, with all the information in the world, finds it difficult to be in every nook and corner of the financial system to stop poor lending,” the article said.

Last week, an Internal Working Group (IWG) set up by the Reserve Bank of India (RBI) made various recommendations, including that a large corporate may be permitted to promote banks only after necessary amendments to the Banking Regulations Act.

The IWG was set up to review extant ownership guidelines and corporate structure for Indian private sector banks.

Referring to the group’s proposal to allow Indian corporate houses into banking, the article said, “its most important recommendation, couched amidst a number of largely technical regulatory rationalisations, is a bombshell”.

“… it proposes to allow Indian corporate houses into banking. While the proposal is tempered with many caveats, it raises an important question: Why now?,” the article said.

The article — posted on Rajan’s LinkedIn profile on Monday — noted that the IWG has suggested significant amendments to the Banking Regulation Act of 1949, aimed at increasing the RBI’s powers, before allowing corporates houses into banking.

“Yet if sound regulation and supervision were only a matter of legislation, India would not have an NPA problem. It is hard not to see these proposed amendments as a subtle way for the IWG to undercut a recommendation it may have had little power over.

“In sum, many of the technical rationalisations proposed by the IWG are worth adopting, while its main recommendation — to allow Indian corporate houses into banking — is best left on the shelf,” they opined.

Also Read | S&P sceptical of allowing corporates into Indian banking sector
“Have we learnt something that allows us to override all the prior cautions on allowing industrial houses into banking? We would argue no. Indeed, to the contrary, it is even more important today to stick to the tried and tested limits on corporate involvement in banking,” the article said.

Further, Rajan and Acharya said that as in many parts of the world, banks in India are rarely allowed to fail — the recent rescue of Yes Bank and of Lakshmi Vilas Bank are examples. For this reason, depositors in scheduled banks know their money is safe, which then makes it easy for banks to access a large volume of depositor funds.

They noted that the rationales for not allowing industrial houses into banking are then primarily two. First, industrial houses need financing, and they can get it easily, with no questions asked, if they have an in-house bank.

According to Rajan and Acharya, the second reason to prohibit corporate entry into banking is that it will further exacerbate the concentration of economic (and political) power in certain business houses.

“Even if banking licenses are allotted fairly, it will give undue advantage to large business houses that already have the initial capital that has to be put up. Moreover, highly indebted and politically connected business houses will have the greatest incentive and ability to push for licenses,” they said.

The approach of the RBI regarding ownership of banks by large corporate/ industrial houses has, by and large, been a cautious one in view of serious risks, governance concerns and conflicts of interest that could arise when banks are owned and controlled by large corporate and industry houses.

For the first time in 2013, the RBI, in its Guidelines for Licensing of New Banks in the Private Sector, had prescribed several structural requirements of promoting a bank under an Non-Operative Financial Holding Company (NOFHC).

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India

Does NEP seek to end reservation policy? Sitaram Yechury asks PM Modi

In the letter, Yechury highlighted how the NEP had no mention of reservations for the Scheduled Castes, Scheduled Tribes and Other Backward Class communities, and the differently-abled.

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Sitaram Yechury

CPI(M) general secretary Sitaram Yechury wrote to Prime Minister Narendra Modi on Monday, asking him if the new National Education Policy sought to end the reservation policy in the educational institutions.

In the letter, Yechury highlighted how the NEP had no mention of reservations for the Scheduled Castes, Scheduled Tribes and Other Backward Class communities, and the differently-abled.

Approved by the Union cabinet in July, the NEP replaces the 34-year-old National Policy on Education framed in 1986. It is aimed at paving the way for transformational reforms in school and higher education systems.

“I am writing this letter to highlight one particular issue which is causing great anxiety especially among SC, ST, OBC communities and the disabled,” Yechury said. “It is truly shocking that NEP 2020 makes no mention of reservations for these sections, either for admissions or for appointments to teaching and non-teaching positions.”

In fact, even the word ‘reservation’ does not appear anywhere in the policy document. This has led to widespread concern whether this act of omission is deliberate, conveying the intention to reverse many decades of efforts to integrate quality, quantity and equity in the education system, according to Yechury.

The CPI(M) leader sought Modi’s response to a set of questions, which the former said were pertinent aspects that need to be discussed.

“Does NEP 2020 seek to end the policy of reservations for SC, ST, OBC and disabled in educational institutions? If not, could you please clarify as to why NEP2020 does not contain any mention of reservations?,” Yechury asked.

He alleged that various elements of the NEP were being rolled out in different parts of the country in an ad-hoc “piecemeal manner” without discussing with important stakeholders — state governments (education is on the concurrent list), students, teachers, non-teaching staff and experts.

“This is creating grave uncertainties and confusion about the actual direction proposed for the Indian Education system under this new policy, by your government,” he added.

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