The Lok Sabha will take up the Constitution Amendment Bill for introduction of Goods & Services Tax (GST) on Thursday, which will be put to vote after a four-hour discussion.

Since the government is in a complete majority in the Lower House, it will have no problem in getting the Bill passed. Though the government is in a minority in the Rajya Sabha, it is unlikely to face any resistance as the principal Opposition party, the Congress, backs the GST.

After approval from both Houses, the Bill needs to be ratified by at least 15 State Legislatures, followed by Presidential assent before it becomes a law. The government intends to introduce the new indirect tax reform from April 1 next year. The Bill was introduced in Lok Sabha on December 19.

The new tax regime aims to remove the cascading effect of taxes and provide for a common national market for goods and services.

For this, the Constitution has to be amended to confer concurrent power on the Centre as well as States & Union Territories with Assemblies to make laws for levying taxes on every transaction of supply of goods or services, or both.

On Tuesday, the government approved a key proposal required to fulfil the promises made to States to bring them on board for GST. It formally decided to pay past compensation due (in lieu of phasing out Central Sales Tax or CST) of ₹33,000 crore in three instalments. The first instalment of ₹11,000 crore will be paid in the current fiscal, while a provision of ₹15,000 crore has been made for 2015-16 (April 1, 2015-March 31, 2016).

After these two instalments, the Centre will have the option to either pay the balance ₹8,000 crore in 2016-17 or seek Parliamentary nod for additional expenditure in the next fiscal.

The compensation will be 100 per cent for first three years, 75 per cent for the fourth year and 50 per cent for the fifth year.

All goods and services, except alcohol for human consumption, will be under the purview of GST, as also petroleum and petroleum products.

However, it has also been provided that petroleum and petroleum products shall not be subject to GST levy till notified at a future date on the recommendation of the GST Council. The present taxes levied by the States and the Centre on petroleum and petroleum products, i.e., sales tax/VAT, CST and excise duty, will continue to be levied in the interim period.

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