Go Back

President Pranab Mukherjee approves landmark GST Bill

Livemint:  September 09, 2016

New Delhi: A key milestone in the roll-out of the goods and services tax (GST) was achieved after President Pranab Mukherjee gave his assent on Thursday to the constitution amendment bill that enables the implementation of this indirect tax reform.

So far the government has managed to close out processes within deadlines, raising expectations that GST will be rolled out on 1 April next year.

The enactment of the bill sets the stage for setting up of the all-powerful GST council—a representative body comprising state finance ministers and the Union finance minister—which will finalize the design of GST.

The council will decide on contentious issues such as the tax rates and sharing of administrative control between the centre and the states, as well as the revenue threshold for traders below which they will be exempt from GST.

Resolution of these issues is a precondition for the government to be able to table the supporting legislations—the central GST law and the integrated GST law—in the winter session of Parliament starting in November.

GST, a destination-based tax, is one of the most ambitious tax reforms undertaken in independent India. It aims to remove inter-state barriers to trade and integrate the country into a common market by subsuming a host of local levies.

After a long delay, the constitution amendment bill was passed by Parliament last month and subsequently ratified by the legislative assemblies of more than 50% of states—Andhra Pradesh became the 20th state to ratify the bill on Thursday—as required under the statute for a constitution amendment bill.

The government has fixed 1 April as the deadline for the rollout of GST, a date that finance minister Arun Jaitley warned on Wednesday would be tough to keep. A lot depends on the ability of the centre and states to strike a consensus over the next three months.

Implementation of GST is a long-awaited reform measure that will reduce costs for businesses in the long run, improve the ease of doing business by doing away with multiple taxes and face-to-face interactions with tax authorities and add to the country’s gross domestic product.

The central government will also have to give industry enough time to make the transition to GST. They will have to make their information technology systems and supply chains GST-compliant. However, this can only be done after the laws receive Parliament’s nod and the government releases the final rules.

The information technology backbone—the GST Network—is in the process of updating the information on traders and preparing the final version of the software. Under GST, the entire registration, tax payment, tax return filing and refund system will be online.

Pratik Jain, leader, indirect tax, at PwC India, said that so far, the government is ahead of the schedule it set for itself.

“Going ahead, the challenge will be for the GST council to agree on the tax rates, the issue of dual control and finalizing the laws and rules under GST,” he said.

“Also, implementation of its decisions will be a challenge since states will not be bound to follow the GST council’s recommendations. If a state does not agree with the council’s decision, it can technically choose not to follow it,” he added.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.