GST rollout to miss April deadline

The UPA government’s proposed comprehensive indirect tax reform, goods and services tax (GST), will miss its scheduled rollout from April 1, 2010, a temporary setback to creation of a unified national market for goods and services in the country, but experts say this will give more time to the centre and states to prepare a more robust framework. “Because of the difficulties in passing the required constitutional amendment bill in the budget session, it will not be practical to introduce GST on April 1, 2010 . New dates for GST implementation will be decided in April”, chairman of the empowered committee of state finance ministers and West Bengal finance minister Asim Dasgupta told reporters after an hour-long meeting of the panel with the union finance minister Pranab Mukherjee on Thursday. The GST, which is a consumption tax, seeks to create a seamless pan-India market with both manufacturers and service providers having the right to adjust taxes paid on inputs sourced from another state. Finance minister Pranab Mukherjee had in October at a summit in the capital city hinted at a delay of few months in implementation of the proposed tax, but later maintained that efforts were on to keep the schedule. Mr Dasgupta’s admission is a clear indication that the implementation of the new regime may be postponed by an year to April 1, 2011, as a number of states may not be willing for even a mid-year roll-out. Even tax experts agree that it was better to delay the launch and come out with a good product than hurry with a patchwork complicated structure. “This will give time to prepare a flawless model”, said R Muralidharan, executive director, PwC .However, Pratik Jain, executive director, KPMG, wanted the government to provide a clear roadmap. “This (missing the deadline) has not come as a surprise. This will give time for preparation but we now need to have a clear roadmap in place,” he said. The centre and states are still debating some of the crucial elements of the new tax structure such as the rates, items that will be taxed and exempted, turnover threshold the most crucial aspect in any tax structure. The centre has pitched for a single rate structure and a uniform turnover threshold of Rs 10 lakh annually. The empowered committee has on the other hand suggested two rate structure and lower turnover threshold for state level GST and higher turnover of Rs 1.5 crore for central GST. The legislative measures for the new tax regime will also require further time.