GST: Meeting the April 2017 deadline will be difficult

The government may be keen to roll out the goods and services tax from April 1, 2017 but passage of the Constitution Amendment Bill in the Rajya Sabha is just one significant but small step in the actual introduction of the indirect tax reform.

The Centre and States will have just about six months’ time to roll out the GST and the Finance Ministry is upbeat that it is possible. “All our systems are in place and we will carry forward the rest of the preparations,” said a senior official.

But the lack of time for its roll out was also raised during the discussion on the Bill in the Rajya Sabha.

The Constitution Amendment Bill will now require the President’s assent, following which the all-important GST Council will also be set up. The Bill will then have to be ratified by at least 50 per cent of the States. Besides, many States are ending their monsoon session, unless they call a special session ratification may get delayed..

Simultaneously, the real nitty-gritty of the GST will have to be worked out. The Empowered Committee of State Finance Ministers along with the Union Finance Minister will now have to finalise the modalities of the legislations on Central GST, State GST and inter-State GST.

The Bills will also have to be passed in the ensuing Winter and Budget Sessions of Parliament and State assemblies.

More importantly, the crux of the GST – the rates of taxation still have to be worked out. Sources indicated that the Centre and the States are yet to reach a consensus on the rate structure.

While the Union Finance Ministry is keen for a rate of around 18 per cent, which was suggested by the panel led by Chief Economic Adviser Arvind Subramanian; States have indicated their keenness for a higher rate of about 20 per cent to 22 per cent.

“The rate of tax can be a deal breaker as it seems unlikely that a high rate would pass muster with Parliament or the people,” said an official.

Additionally, the IT infrastructure and accounting changes by the tax department as well as companies will have to be undertaken. Finance Minister Arun Jaitley informed Rajya Sabha on Wednesday that the IT infrastructure in the form of the GST Network was progressing on time.

Another related issue that still has to be resolved would be the cadre restructuring of the Central Board of Excise and Customs that is still under way.

Industry and tax experts too are keeping their fingers crossed. “Meeting the timeline of implementing GST by April 1,2017 would require these processes to run in parallel and in a time bound manner,” said Rajeev Dimri, Leader, Indirect Tax, BMR.

A mid-year implementation of GST may be possible, according to others.

“While the passage of the Constitution Amendment Bill is certainly an important step, the various above aspects will also have to follow through before GST can be implemented. An April 2017 deadline would therefore be challenging – realistically, the date may be closer to July or October 2017,” said Rohit Jain, Partner, Economic Laws Practice.