New Delhi | 12th Sep 2015
Businesses eagerly waiting for the earliest implementation of the Good & Services Tax (GST) Bill might be up for a major disappointment again as the government called off its decision to extend the monsoon session for want of opposition support to pass the GST Bill. This means that the fate of the GST — that aims to subsume the numerous indirect taxes and levies into one comprehensive one — is expected to linger on till the winter session of Parliament which the government plans to pre-pone i.e. immediately after the Bihar polls. The GST is an ambitious taxation reform which is expected to make tax compliances much easier and transparent thus, facilitating the ease of doing business in India. Experts say that if the GST Bill gets passed in the winter session then its roll-out by 1 April 2016 looks highly improbable.
“The earliest I can see the GST coming into effect is either October 2016 or by April 2017 because constituting the GST council and drafting the GST legislation by the said council would also consume time,” says Bimal Jain, a taxation expert at A2Z Taxcorp LLP.
The current indirect taxation laws perpetuates double taxation and cascading of taxes (imposing tax on already taxed products) causing inconvenience and creating disadvantages for businesses in India, an anomaly that the GST is expected to iron out. For example, eating out in an air-conditioned restaurant invites not only the VAT on the total bill but also the service tax. This is double taxation that discourages consumption. “These disadvantages make Indian businesses and products uncompetitive in the domestic and overseas markets,” says Jain. In the context of China’s slowdown and its currency devaluation, the presence of distorted taxation architecture in India is seen as a major roadblock for it to become a major competitor in the international trade scene.
Even though most of the opposition parties are on board in support of the GST Bill, the Congress is adamant on having the GST tax rate at 18% which the government feels should be left to the GST council to decide as the council would consist of representatives from both the Centre and the states. But for the political opposition, the government is ready with the administrative ground work needed to roll out the GST at the earliest possible date. The GST in India would be the single umbrella legislation on taxation instead of about thirty at present — one for each state.