The GST Bill – The next leap towards GST
While Indian parliamentary matters were generally presumed to be slow paced given India's democratic polity, the last three parliamentary sessions have been considerably productive with over 48 bills introduced and tabled in the Lok Sabha (the lower house of Parliament). The passing of big-ticket reforms such as the Black Money Bill and Goods and Services Tax (GST) Bill highlight the achievements of the new government over the past year.
In this update, we discuss the current position of the GST Bill and the overall preparedness of the government and industry for its implementation on 1 April 2016.
GST Bill in Rajya Sabha – The next hurdle
The 122nd Constitutional Amendment Bill (GST Bill), which was proposed in the Lok Sabha on 19 December 2014, was accepted on 6 May 2015 in its entirety and passed with a striking majority.
Unlike the Lok Sabha, in the Rajya Sabha (upper house of Parliament), the opposition and its allies command over 60% of the vote share. Thus, the next hurdle for the government is to ensure that the GST Bill gets the necessary support in the Rajya Sabha.
Conceding to the demand of the opposition, the GST Bill was sent to a 21-member Select Committee of the Rajya Sabha for review. The Select Committee, under the chairmanship of Bhupender Yadav (Member of Parliament, Bharatiya Janata Party), must report to the Rajya Sabha with its review by the last day of the first week of the monsoon session (July-August 2015).
As the opposition has reiterated that they are ready to lend their support to the GST Bill, the question now is more about when the GST Bill will be passed rather than whether it will be passed at all. Thus, it will be interesting to see how the government will make up for delays in the passage of the Bill to ensure the implementation of GST from 1 April 2016.
Preparedness of the government
Following the parliamentary clearance of the GST Bill, several actions such as its ratification in the state legislatures, enabling the GST Network (GSTN), etc. need to be completed to ensure a smooth transition to the GST regime.
Accordingly, all proposed changes will have to be achieved at least six months before the implementation date in order to enable businesses to get aligned with the GST regime. The Finance Minister, Arun Jaitley, recently reaffirmed that the passage of the GST Bill remains the government's top priority in the next parliamentary session. He also stated that the government is in the process of creating history by bringing about the most important indirect tax reform with the implementation of GST.
- Empowered Committee (EC)
According to news reports, the Empowered Committee of State Finance Ministers (EC) constituted by the Indian government is close to reaching a consensus on the finer details of the GST Act, with a large part of the required groundwork done already.
Five Committees have already been constituted by the EC to handle the various aspects of work related to the introduction of GST. Reportedly, these Committees have completed most of their allotted work and submitted their reports on key issues, including Place of Supply Rules, inter-state GST (IGST), thresholds, etc. to the EC.
Preparedness of the industry
- GST Network
The GST Network (GSTN), a prerequisite for the successful introduction of GST, is being developed simultaneously. It is being set up primarily to provide IT infrastructure and services to the central and state governments, taxpayers and other stakeholders for the implementation of GST. This will ensure that the current indirect tax data available with the various state VAT departments can be integrated harmoniously to create a single, unified indirect tax system.
The Chairman of the EC, K M Mani, stated in an interview that the EC had authorised the GSTN to go ahead with its work to build an IT platform, given its importance and time-bound nature. He also mentioned that the EC was confident the IT platform would be ready by the time GST is to be introduced next year.
Reportedly, 22 major software-solution providers, including CISCO, HP, HCL, etc. have already received Requests for Proposal (RFPs) from the GSTN to develop appropriate GST modules.
Industry, in general, is optimistic about GST as the new regime is expected to offer tremendous business opportunities in India. Trade organisations and business associations have been urging the government to ensure that it adheres to the GST deadline, which is less than a year away.
Businesses are gearing up to ensure that they understand the possible changes, realign their business strategies, supply structure, working capital structure, etc. to ensure that they are ready for the new regulations.
While parliamentary procedures have taken long, this delay is not likely to adversely affect the target implementation date of 1 April 2016. Besides a firm commitment from the Finance Minister, the Union Budget 2015-16 also provided for generous changes, which will facilitate the transition to the GST regime. Given the positive steps taken until now, India is optimistic about the government's ability to deliver GST on time.
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