Will GST keep its date with April 1 this year

Will GST keep its date with April 1 this year
Will GST keep its date with April 1 this year

Does the government have sufficient time to roll out the Goods and Services Tax (GST), which is, arguably, the biggest tax reform ever attempted in India “I am trying my best,” Finance Minister Arun Jaitley had said when asked about the April 2017 deadline for GST. But experts and analysts feel it will be difficult for the government to meet this rollout schedule as the GST Council, the apex dispute resolution body for the tax, has not yet resolved several issues, the most vexatious of which is the jurisdiction of the Centre and the states over some classes of tax payers. Jaitley, who heads the council comprising state finance ministers, has managed to evolve a consensus on most issues. He has said that constitutionally, the GST will have to roll out latest by September as per the Constitutional Amendment Bill passed by Parliament. The introduction of GST will replace a welter of indirect central and state taxes such as Central Excise (Cenvat) duty, service tax, central sales tax, entertainment tax, octroi and entry tax, etc with one tax and bring uniformity in India's taxation structure and lead to cheaper goods and services. It will stitch India's 29 states, which currently operate as separate markets, into one common market. Each state now levies a bewildering number of levies. This results in cascading taxes, massive complexities, higher prices for consumers, difficulties in administering the indirect tax regime and largescale corruption. A common complaint that most businessmen have against India is that it is easier, cheaper and it takes less time to ship goods from Europe to Mumbai than to transport the same goods from India's financial capital to Delhi. The culprit The entry taxes charged by various states as well as the plethora of state-level levies that have to be calculated before trucks can cross state borders. It is a common sight to see miles-long lines of trucks parked at state borders while petty officials go about their task of calculating taxes. GST will subsume all these state-level taxes and so considerably reduce the need for this elaborate and corrupt network of infrastructure and officials at state borders. Transport times will improve dramatically, corruption will be reduced and inventory management costs will fall once these unnecessary network of check posts is dismantled. CRISIL Research report estimates that “the rollout of GST will bring down the logistics costs of companies engaged in the production of non-bulk goods by as much as 20 per cent. Savings will accrue as a result of gradual phasing out of the central sales tax, consolidation of warehouse space, faster transit of goods since local taxes will be subsumed into the GST and as state level check posts will be dismantled.” At present, the same item often costs different amounts in different states because of local levies. Alternatively, companies that want to sell their products at a uniform price across the country - for example, a small bottle of Coca Cola at Rs 5 - have to tweak prices for each state so that the final post-tax selling price remain the same. This increases the complexities of calculating taxes and naturally increases the scope for both disputes and corruption. GST will ensure simplicity and easier administration. And finally, based on the experience of other countries, economists expect GST to add 1.5-2.0 per cent to GDP growth over a three to five year period. The big monkey in the room is demonetisation. How this initiative will affect the GST rollout, however, remains to be seen.

Related Stories

No stories found.

Podcast

No stories found.

Defence bulletin

No stories found.

The power of the quad

No stories found.

Videos

No stories found.

Women Leaders

No stories found.
India Global Business
www.indiaglobalbusiness.com