Parliament not the only hurdle for GST
DNA, August 15, 2015
All hopes of the
government rolling out goods and services tax (GST), which will
unify all indirect taxes into a single levy across the country,
by April 1, 2016, are hanging in balance after the Monsoon
session of the parliament ended on Thursday without the passage
of Constitutional Amendment (122nd) Bill.
government has said it would look at calling a special session
of the parliament for the new tax law, very few are confident
that it can be implemented within the stipulated timeframe.
M S Mani, senior
director ? indirect tax ? Deloitte India, said special session
of Parliament was, at best, another last ditch effort of the
government to push the Bill.
He, however, said it
should be done only after creating broad consensus on the
indirect tax law to ensure it did not meet the same fate as it
did in the latest parliament session.
"If the government
decides to call a special session then the April 1, 2016,
deadline would be difficult, but it can be tried. Also, the
opposition has to allow its passage in the special session, for
which the government will need to whip up a broad consensus," he
Mani believes if the
Bill is pushed to the Winter session then the 2016 deadline
would be out of reach for the government.
Uday Pimprikar, tax
partner, EY, expressed disappointment at the much-awaited law
not being passed. "I would think that, at a basic level it is
unfortunate that Parliament is not functioning and the Bill
could not be passed."
He said April 1,
2016 timeline for the GST to kick off was, anyway, a "fairly
daunting task and a huge challenge even if it is passed in the
special session that could be called by the government."
Pimprikar, as long as the government showed serious intent and
continued to be persistent about it, a few months delay wouldn't
"Today, whether the
GST Bill is coming or not is not the question. It is being
supported by most parties. It has a few design issues, but that
can be sorted out. And an excellent GST should not become an
enemy of the good GST. Even a decent Bill, with a few
compromises, will go a long way in helping the economy," he
Deloitte's Mani said
missing the April 1, 2016 deadline did not mean it would be
pushed to 2017 as reforms in indirect tax can be introduced at
any point of the financial year.
"Unlike direct tax,
where a fiscal year cycle is followed, indirect tax follows a
monthly cycle. So GST's roll out may be delayed by only a few
months if constitution amendment Bill is pushed to winter
session," he said.
Mani said after
having waited for over five years for GST, a few months' delay
will not hurt businesses much.
Pimprikar said a few
months' delay meant instead of GST's impact becoming visible in
short term, it would be seen over medium term.
What is making the
economists sceptical about the government meeting the current
deadline is the processes that still need to be completed.
After being passed
in the Budget session of Parliament in the lower house, the Bill
was referred to the Rajya Sabha Select Committee, comprising 21
members, that has made some amendments and recommendations.
So, it is back in
the Lok Sabha for clearance. After this, 50% of the state
assemblies would be required to approve it. Thereafter, it will
need a Presidential assent. Once this is acquired, a GST Council
will be formed within two months. This council will then work on
the Bill and come out with guidelines for it.
"If the Bill had
been passed (in the Monsoon session), these processes would have
been completed over the next 2-3 months, but now it looks
tough," said Mani.
He said GST is the biggest tax reform attempted by the country,
and its delay will send a negative signal to trade and industry.
"If it happens it
will result in ease of doing business in India, compliance will
be simpler and will transform the country into a common market,"
He said a diluted or
a less-than-perfect GST should not be a "show stopper". A
visibly upset finance minister Arun Jaitley, who addressed the
media after the Monsoon session ended in a washout on Thursday,
claimed GST would have benefited to the country. He said earlier
that the uniform indirect tax will add 1-2% to the GDP growth.
"The entire country
would have become an economic market. It would have led to ease
of business, would have increased tax buoyancy, GDP would have
benefited and goods and services would have move throughout the
country. A market of this size would have been rare across the
world," he said.
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