GST deadline of April 2017 under cloud

Over the next two days Finance Minister Arun Jaitley and his team have a tough task ahead as the roll out of the goods and services tax (GST) from April 1, 2017, is dependent on the outcome of the GST Council meeting starting on Thursday.

The Centre will try to break the logjam on the contentious issue of administrative control of businesses. The delay in consensus on the administrative control between the Centre and the States has also delayed the timeline for the passage of the subsequent legislations (CGST, IGST and SGSTs). Added to this is the concern by States over demonetisation.

During the two-day meeting, the Council is also expected to finalise the draft model legislations for the Centre, States and Integrated GST and the Compensation Bill. The Bills will then be taken up for passage in the forthcoming Budget Session of Parliament and State Assemblies.

“If the concern over jurisdiction over businesses gets sorted out in the next two days, we are hopeful that GST can be implemented any time. As of now, we have not received any alternative solutions from the Centre,” said Jayant Kumar Malaiya, Finance Minister of Madhya Pradesh.

However, other States such as Kerala and West Bengal had indicated after the last GST Council meeting that the roll out of GST may have to be pushed.

“Demonetisation derailed the mutual trust. Topples the GST plans from April 1,” Thomas Isaac, Kerala Finance Minister, had tweeted on December 11.

West Bengal Finance Minister Amit Mitra too had said GST may be difficult to implement from next April as demonetisation is impacting States’ economy.

“Till now, States have been agreeable to the roll out of GST from next April due to the comfort from the promise of compensation for any revenue loss by the Centre. Solving the tricky issue of dual control is the key. The timeline has now been thrown for a toss by the problems arising out of demonetisation and the delay in tabling the GST Bills,” noted another State Finance Minister.

Jaitley has also recently indicated that GST can be rolled out even later in the year as it is a transaction tax. “Transactional tax can start in any part of the financial year and therefore, the range of timing when it has to come into force because of constitutional necessity is April 1, 2017 to September 16, 2017. Hopefully, the earlier we do, the better it is for the new taxation system,” he had said.

Industry too is cautious over the roll out of GST and is of the view that there would be very little time to prepare for an April implementation.

“There are chances that the deadline of GST implementation will be missed as there are certain unresolved issues. The commodity-wise rate should be fixed and the issue of dual control needs to be resolved,” Naveen Wadhwa, DGM, Taxmann, adding that the final GST law and rules should also be placed in public domain so that the taxpayers have sufficient time to customise their ERP.

“Considering the suggestions from some of the State governments to defer GST implementation, a delay of few months beyond April 2017 may not be ruled out,” said EY in a recent note.