GST: Delay in Implementation

In 2006, the UPA Government announced that a comprehensive GST would be launched on 1st April, 2010 and it was believed that the introduction of GST is a difficult task, as our current structure of indirect taxes is driven by  the multiplicity of taxes. Some levied by the Centre and others by the States.

Under the Chairmanship of Dr. Asim Dasgupta, the Empowered Committee carve out the design and structure of GST. The new regime GST gives an opportunity to bring together the machinery of the Centre and the States to jointly work for better enforcement.

Prime Minister has also realized and stated that we have travelled a long way on implementing or introducing a GST regime.

The new debatable question arose as the time passes that creates confusion on various aspects between Centre and State and thus causes delay in the implementation of the GST i.e. on 1st April, 2010. States including Rajasthan, Gujarat , Tamil Nadu and Madhya Pradesh are demanding deferment of GST implementation, saying that there is still no consensus on its various aspects. Having lack of preparedness, the Task Force postponed the implementation of GST from April 1, 2010 to Oct 1, 2010.It is pertinent to mention here that Task Force constituted by the 13th Finance Commission  after raising the demands of some States.

In Oct, 2009 the E C of state Finance Minister have decided to release a discussion paper regarding the final structure of GST by the end of the month. But, States like Karnataka and Gujarat opposed the deadline i.e. April 1, 2010 as having inadequate ground level preparations and some States also pointed out that the preparation of IT infrastructure HSN code and legislation is essential, especially for tracking the movement of goods and services.

There is much dispute over the reduction rate of Central Sales Tax .Due to CST reduction, some States were losing revenue in crores annually. Dr.Asim Dasgupta also said that 'CST loss is a serious issues for States'.

The another controversy arose in the matter of petroleum and in alcohol. There are restrictions on availing credit of taxes paid on fuels. Further, the Task Force has recommended a dual levy of GST and excise on tobacco and alcohol with restrictions on credit. The EC aligned with the Task Force on Tobacco, however in case of alcohol they suggested that it should be out of the ambit of  GST while Vat and excise duty should be continued.

Vijay Kelkar, chairman of the 13th finance Commission also suggested sectors such as real estate and construction as well as railways to brought in the ambit of GST just to bring more transparency in the real estate sector transaction.

From the source of The Hindu Business….Mr. Jose Cyriac, Additional Secretary ( Revenue ) Ministry of Finance stated that the GST regime, which is excepted to come into force on April 1, 2010 will be 'trade friendly' and also warned about the issues includes consensus over rates, differential rates on certain items, compensation mechanism for States losing out on revenue etc and also required a constitutional amendment for its implementation.

The First  Discussion Paper released by Empowered committee of finance Minister on 10th Nov,2009 envisages an extremely diluted form of GST and the implementation of the GST should be postponed to 1st Oct,2010.

In an Interview with CNBC-TV 18, Rajeev Dimri Head Indirect taxes at BMR and associates told that "The government could make some preparatory changes." The GST was implemented on April 1st 2010 but, now it is excepted that it will implemented on April, 2011.

Another interview with Anil Khandelwal Chief Financial Officer, Cox and Kings ( India )ltd has told CNBC-TV 18 that "I think the most important thing  is rationalization of service tax. Most important is we are moving towards the GST very soon, I think that will a positive factor because right now there are lot of industry anomalies which are there in the service tax sector, which needs to be corrected, I think GST, going forward, is going to correct those anomalies".

On 26th Feb,2010 Finance Minister in Budget speech has announced a roadmap for GST. In his words, "The process of building a simple tax system  is near completion." We aim to implement GST by April 1,2011.

There is a also criticism against the number of exemption mentioned in budget that meant to increase the distortions.

To summarise the above, the GST will be implemented on April 2011 and is welcomed by all the classes.