Prime Minister Narendra Modi on Monday said almost all the commodities used by the poor had been kept out of the purview of the GST.
He sought to allay fears that the Goods and Services Tax (GST) Bill would raise inflation and hit the common man.
“Close to 55% of the food items and medicines will not be taxed under the GST,” the prime minister said, intervening in a debate on the Constitution (122nd Amendment) Bill in the Lok Sabha.
In his 42-minute intervention, Modi said the GST regime would compel traders to give proper bills to consumers and help fight corruption and black money.
“The GST will strive to free India from tax terrorism,” Modi said as he vowed to pay tribute to freedom fighters after 75 years of Independence by bringing in the tax reform as soon as possible.
Replying to the bill in the House, Finance Minister Arun Jaitley sought to address the concerns of the manufacturing states, saying taxes on manufactured goods will be brought down from as high as 30% at present. He said the bill had enough provisions to help the manufacturing states, including Gujarat, Maharashtra, Karnataka, Madhya Pradesh and Tamil Nadu.
The bill was cleared by Parliament after it got the Lok Sabha’s approval by 443 to nil votes ushering in the biggest indirect tax reform since Independence. The Lower House had passed the bill in May 2015. It took it up again to approve the modification made by the Rajya Sabha last week.
Jaitley said that at present there were 80% goods on which the Centre imposed excise at the rate of 12.5%.
Another 27% goods come under the sales tax levied by the states.
The GST seeks to subsume these taxes and bring them down to an acceptable level, he said.
The prime minister sought the cooperation of the states to implement the bill as early as possible.
At least 16 of the 29 states need to pass the bill in their legislatures in order to make it a law.
Given that 13 states are governed by the BJP or a BJP-led coalition, and others such as Bihar, Uttar Pradesh, West Bengal and Orissa have extended support to the GST, it should not be difficult for the Centre to cross that hurdle.