In a bid to strengthen the chances of passage of the crucial GST Bill, the Union Cabinet here on Wednesday approved key changes in the proposed legislation, including dropping the proposed one per cent additional tax on inter-state sale, sources said.
This provision's removal has been a key demand of the opposition Congress.
The cabinet, which met under the chairmanship of Prime Minister Narendra Modi, also agreed to include the mechanism to compensate states for all loss of revenues for five years.
Minister of State for Parliamentary Affairs Mukhtar Abbas Naqvi earlier told the Rajya Sabha that the GST Bill will come up for discussion in the first week of August. It is pending in the Rajya Sabha, where the National Democratic Alliance government lacks a majority.
On Tuesday, West Bengal Finance Minister Amit Mitra chaired the meeting of the empowered committee of state finance ministers to form a consensus on the bill, and the states agreed to keep the GST rate out of the bill. However, there was no decision on what the rate should be as all the states did not agree on the proposed 18 per cent rate.
The Congress demands that the constitutional amendment bill sould provide for capping the GST rate at 18 per cent.
Mitra said a broad consensus has been worked out on the GST and all are of the opinion that taxes on the common man need to be reduced. At the same time, there is a need to ensure that the trend of revenue collection continues, he added.
"It is very important that tax on the common man is significantly reduced. At the same time we need to safeguard the taxes going to the state exchequer," he said.
The states are demanding that there should be no dual control on businesses with an annual turnover of less than Rs 1.5 crore, and this issue has to be resolved for the GST to happen, Mitra said after the panel's meeting.
"We will work towards this so that small businesses do not suffer. It has to be through a consensus for the GST to happen," Mitra added.
The Congress is also demanding an independent dispute resolution mechanism for the GST.
The GST was first mooted by the previous Congress-led United Progressive Alliance government.