The Cabinet Committee on Economic Affairs Wednesday approved the Goods and Services Tax (GST) Bill paving the way for its tabling in the ongoing session of parliament towards reform of India's indirect tax regime.

 

 

 A senior finance ministry source told IANS of the CCEA approval after it met to consider the bill.

 

 Finance Minister Arun Jaitley had reached a consensus with the Empowered Committee (EC) of State Finance Ministers on GST in a meeting here late Monday.

 

 The source told IANS that the details of the agreement with the state finance ministers are currently being fine tuned. 

 

 The previous United Progressive Alliance (UPA) government had in 2011 introduced a Constitution Amendment Bill in the Lok Sabha towards the introduction of the GST. States sought a five-year compensation package and asked for its inclusion in the bill.

 

 Earlier, seven states' finance ministers in a meeting here Thursday rejected the draft Goods and Services Tax (GST) Bill, saying it does not address their concerns on the issues of compensation, entry tax, and the tax on petroleum products.

 

 Jaitley told parliament Wednesday that states will receive Rs.11,000 crore this fiscal towards partial compensation of the losses suffered by them for reduction in central sales tax (CST).

 

 While the CST is levied by the Centre on inter-state movement of goods and collected by states, the issue of compensation arose because the central government cut the CST from 4 percent to 2 percent in phases, after state-level VAT was introduced from April 1, 2005.

 

 States also want petroleum, alcohol and tobacco to be kept out of the purview of the GST.

 

 Seen as a key to facilitating industrial growth and improving the business climate in the country, the GST bill needs to be passed by a two-thirds majority in both houses of parliament and by the legislatures of half of the 29 states to become a law.

 

 By subsuming most indirect taxes levied by the central and state governments such as excise duty, service tax, VAT and sales tax, GST proposes to facilitate a common market across the country, leading to economies of scale and reducing inflation through an efficient supply chain.

 

 Full implementation of GST could lift India's gross domestic product (GDP) growth by 0.9-1.7 percentage points, according to a study by the National Council of Applied Economic Research (NCAER).