Secretaries in the finance ministry, Hasmukh Adhia and Shaktikanta Das, hint that implementing the tax reform in the middle of a fiscal may not be a good idea
New Delhi: The government on Tuesday signalled that the goods and services tax (GST) will be implemented from 1 April 2017 even if the constitution amendment bill on GST gets cleared in this session of Parliament.
Speaking at the CNBC TV 18-Mint Budget 2016 event, two secretaries in the finance ministry hinted that implementing this tax reform in the middle of a fiscal year may not be a good idea.
This means that GST will unlikely be implemented in the middle of 2016-17, now that the government is set to miss the 1 April 2016 rollout date.
“Ideally, we should have GST from the beginning of a fiscal. Once the constitution amendment bill gets passed in Parliament, we need about five-six months of preparation (to roll out GST). Businesses also need to time to prepare and traders need to be explained the working of GST,” said revenue secretary Hasmukh Adhia.
Department of economic affairs secretary Shaktikanta Das also pointed to the long time required to put all things in place for GST to be rolled out.
“Once the Parliament passes the GST Bill, 50% of the states have to ratify it and then both the centre and states have to pass CGST and SGST bills (central and state GST bills), respectively and rules have to be made under them,” he said.
The implementation of GST was delayed after the government failed to push the constitution amendment bill in the Rajya Sabha on account of opposition from the Congress. GST aims to remove barriers across states and integrate the country into a common market. It will subsume all indirect taxes including excise duty, service tax and value-added tax.
“It is quite realistic. First the constitution amendment bill has to be passed. Then if you look at the requirements—the ratification by the states, the model laws, the GST network and the subsequent preparation time needed for industry, April 2017 seems more realistic,” said Harishanker Subramaniam, indirect tax leader at consulting firm EY.
Also at the event, minister of state for finance Jayant Sinha said that the government and the Reserve Bank of India had worked out the capital requirements of state-run banks to meet the Basel-III norms by 2019. Despite the steep rise in bad loans reported by banks in the third quarter, the capital requirement is not much different from the Rs.1.8 trillion calculated by the government.
“We have committed to provide Rs.70,000 crore over the next few years to banks. The remaining Rs.1.1 trillion they have to raise from the market. That will be the challenge,” Sinha said, adding that the bad loans situation, especially in the steel sector, is another thing the government is closely monitoring.
He added that many policy options were under consideration. “Our banks have core and non-core assets, they can issue equity and non-equity instruments that are assets including real estate assets that can be monetised, they can work their balance sheets harder, they can use their capital much more efficiently. I can assure you that our banks are absolutely robust,” he said.