With Rajya Sabha's nod to the landmark Goods and Services Tax (GST) Bill, the government will have to now face the hurdle of actually implementing it on time.
GST will face several legislative steps before it is ultimately implemented by its rollout date of April 17. That includes a majority of Indian states will have to pass the GST amendment, and work toward forming a GST Council that will finalise the nuts and bolts of the new tax. That may not happen until November and many believe the final rollout may go beyond April, say experts. The amendments will also need to be cleared in the Lok Sabha again.
However, Finance Minister, Arun Jaitley, is `hopeful' the rollout to happen in time by April. Jaitley told NDTV on Wednesday, "This [GST bill] economically integrates India by both Centre and States pooling in their sovereignty and instead of having multiple taxation at multiple rates, tax on tax and the cascading effect, it integrates India into one economic entity," Jaitley said. "Evasion will become more difficult. It's the step that will help the Indian economy to grow," he added.
Additionally, a huge IT system will needs to be set up, tax collectors trained and companies brought up to speed on a levy that experts say will force them to overhaul business processes from front to back.
The IT infrastructure needed for the GST portal will now move into high gear. Testing of the software behind the GST portal should start by October with a beta launch planned for February, Prakash Kumar, the CEO of Goods and Services Tax Network (GSTN), the entity managing the IT, told Economic Times.
One corporate boss who isn't ready is G.R. Ralhan, head of Roamer Woollen Mills in the northern city of Ludhiana.
"Companies, particularly smaller ones, are apprehensive," Ralhan told Reuters, calling for more time to adjust and saying a high rate of GST could put his firm out of business.
According to tax experts, only about 20 percent of - mostly big - firms are getting ready for the GST.
GST is a blanket indirect tax that will subsume several indirect state and federal taxes such as value added tax (VAT) and excise duty, and different state taxes, central surcharges, entertainment tax, luxury tax and a slew of related levies by local bodies.
It is expected to add two per cent to the country's GDP, besides making the movement of goods easier across states. Because so far taxes have varied across states, often commercial trucks have had to go through multiple checkpoints to obtain the necessary permits and pay several taxes to the states they pass on their routes, which causes delays and encourages bribery. A uniform tax will make that movement of commercial products smoother.
With Reuters inputs