The tax reform GST at last, but much still to be done
The final pieces of the GST puzzle seem to be falling in the right places for a July 1 roll out, with the Lok Sabha passing all the four GST related bills - Central Goods & Service Tax Bill, 2017, Integrated Goods & Service Tax Bill, 2017, Union Territory Goods & Service Tax Bill, 2017 and Goods & Service Tax (Compensation to States) Bill, 2017 today.
There is still, however, lot remaining to be done in the next three months for GST to become a reality including passage of the State GST Bills by all the States, notification of GST Rules, finalization of GST rate schedules and readiness of GSTN.
The finalization of GST Rules will be the key agenda for the GST Council meeting scheduled for 31 March. It appears that there would be a total of nine set of rules covering registration, payment, refunds, invoices, returns, composition, valuation, input tax credit and transition provisions. While it is anticipated that all rules will be finalized in the 31 March meeting, given that the government has recently created ten working groups to deal with certain specified sectors and give their recommendations by 10 April, it is possible that the industry may get to see the final set of legislation only by mid-April.
The FM has indicated that the topic of finalization of GST rate schedules will be taken up after 31 March. This, along with a decision on fate of existing exemptions, needs to be done at the earliest, to allow the industry to understand the exact impact on their products and services and take decisions on pricing accordingly, especially given that the anti-profiteering measures under the GST law require businesses to pass on benefit of reduced tax rates to the customers.
Even assuming all States will pass the respective State GST laws before July 1, the issue of introduction of GST in J&K remains a vexed topic. Latest news reports indicate that J&K will start drafting its own GST legislation only in May or June. Any delay in roll out of GST in J&K vis-à-vis rest of India will create multiple practical challenges for businesses selling to/ purchasing from J&K.
Other practical challenges to a successful transition to GST include training of indirect tax officers at both Centre/ State level on the GST law and procedures as well as readiness of GSTN well before the go-live date. Businesses could stand to lose significant amount of credits or face the risk of non-compliance if the GSTN does not function smoothly, including the credit reconciliation mechanism. Also, given that SMEs form major bulk of the assessee base under GST, it is imperative that the government commences its outreach program for educating such dealers at the soonest, as promised by the Hon’ble Prime Minister.
While progress on GST implementation has picked up pace, there is still a lot to be done, both by the government and the industry. Clarity on the various relevant aspects, some of which have been discussed above, would ensure a smoother transition to GST for the country.
The author is Partner, Indirect tax, EY India.