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The Fate and Economics of GST...
Wed, 3 Aug Pre-Open

Among a lot of things that are moving the Indian stock markets, the possibility of GST becoming a reality tops the list. As soon as the markets get some whiff from this corner, there's a beyond normal movement in the stock market. And the odds that the GST Bill gets a thumbs-up in the Upper House seem pretty decent. The reasons for this are many. The tussle amongst the political parties in this regard has dimmed. There are some amendments introduced. And the Bill has finally been listed for discussion in the Rajya Sabha (RS) today.

Many news from the mainstream media opine that GST is soon going to become a reality. There are also some logjams and technicalities involved. Some of the intricacies to be noted in this regard. They are as follows.

The Bill is all set to be approved by the Rajya Sabha today. This comes as Union Finance Minister Arun Jaitley will be moving four amendments to the Constitution (122nd Amendment) Bill. These amendments are meant for the roll-out of the GST in the House, when it is taken up for consideration and passage.

The planned amendments seek to address four issues. For first, they aim to withdraw the 1% additional tax proposed earlier in the GST Bill. Second, they will guarantee the States full compensation over a period of five years for any losses from the shift to the new tax regime. Third, it will propose a new mechanism for dispute resolution in the GST Council where the states will have a greater say. And for the last, there will be introduced a fresh assurance in the amendment that the GST rate will neither lead to revenue losses for the states nor hurt the consumers.

The above amendments have helped in bringing the Congress and other parties on the same page to support the legislation. Reportedly, a Rajya Sabha member from the party stated the Congress members in the Upper House will be voting in favour of the Bill.

Further, a three-line whip has been issues by the BJP to its members to be present in the House. This means that there is a very good chance the GST Bill is will clear Parliament.

The Congress party has also dropped its demand for capping of GST rates in the constitutional amendment and suggested 'ring-fencing' of GST rates ahead of the monsoon session.

So going by the above developments one can say there is no stone left unturned for the passage of the GST Bill. If all goes well and as planned, the Bill, due to the recent amendments, will once again go back to Lok Sabha once the Upper House clears it. In the Rajya Sabha, two third of the members (163 members) will have to support the Bill. The government of course has a clear majority in the Lok Sabha.

While GST would be a time-consuming and complex rollout, its passage would mean the biggest change in the country's tax structure since India's independence.

The implementation of GST must be a high priority for the government in order for it to be effective. The government will have to address same key issues and ensure that the GST proves to be a boon and not bane for the country.

As far as financial markets are concerned, we have reminded our readers that GST should not change one's perception about businesses and the way they value them. In other words, following a bottom-up approach and picking undervalued stocks during such times could prove to be the best play.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

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