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Uncertainties in Implementation of GST (Goods and Service Tax)

One of the biggest tax reforms in India- Goods and service Tax is all set to integrate state economies and Boost overall growth.GST will create single, unified Indian market to make economy stronger. Finance Minister while presenting the budget on 6, July 2009 said that GST would come in effect from April 2010. The Finance Minister is willing to implement GST from 1.04.2010. But till that day they have not decided on what goods and service state will collect and on what centre. All time they are experimenting with the taxation and for the same a lot of funds have been mis-utilised. One fine morning NETA dreams to decorate all roads with the Flowers then whole government machinery will run behind the dreams of NETA without thinking about the utility of same. Likewise one has decided to implement GST all of them tried their level best but they failed to understand whether the GST which is applicable in other country is also useful for our country. When VAT was implemented many false promises are made by government .which showed it as dream tax system. But till that date not a single promise has been fulfilled. No local taxes like entry tax, Octroi etc. will be removed as promised in GST. It will be more cumbersome, Harassing. There is lot of uncertainties in implementation of GST. The Goods and Services Tax (GST) was originally to be implemented in 2010. Until 2009, no one took much notice, even though everyone agrees that the implementation of GST is an extremely momentous and far reaching tax reform. Then, in 2009, everyone – the


media, industry and consultants of every stripe – got extremely excited about this reform that was just a few months away, at the time. However, GST was not implemented in 2010, or in the next two years. The pendulum seems to have swung the other way now. No one says much about GST and possibly with justification. There is naturally a sense of fatigue after three false alarms. Possibly GST has been shelved for now, with the Government having only two years left in its current term. However, at some point in the future, possibly after the general elections, one can imagine that we will be back in the ’09 mode, with everyone gearing up for GST once more. In the midst of this uncertainty is the CFO. He has to wade through the hype and take sensible decisions on when to commit his company to making changes that are required to handle the demands and opportunities posed by the new regime. Given the many false alarms, what should the CFO do, when the hype starts once more. Is there any clarity on when it is likely to be implemented? To try and provide some answers, one has to first understand what happened in the past three years. Why is it that despite the finance minister repeatedly asserting that GST would be implemented on April 1, 2010 (and then equally confidently announcing dates of 2011 and 2012), nothing has happened. The answer seems to lie in the fact that the Constitution of India has to be amended to provide a legal basis for the new law. Therefore, no matter what the finance minister says, or for that matter, any other person says, GST implementation cannot progress beyond the drawing board until the Constitution has been amended. It appears that while efforts to amend the Constitution have been shelved for now, there is a tremendous amount of work that is ongoing to prepare the information technology systems and the draft law. Therefore, as and when a political consensus emerges, the Government would be prepared to implement GST So sometime in the future, possibly after the next general elections; talk of GST would start again. At some stage, the Constitution would be amended. At that stage, industry would naturally drop its skepticism, and believe that GST is going to become a reality. Let’s say, for purposes of argument, the Constitution is amended in 2015. The question is, Can be believe that GST will become a reality in April 2016. GST implementation requires not only amending the Constitution, but also enactment of a state GST law by each of the states in India. Therefore, even after the Constitution has been amended, the enactment of a law by a number of states is likely to be a process that would take a minimum of two years .Based on the example given above; we are talking about 2017 being the earliest date of implementation of GST. Closer to


date, around the time frame of 2016, a CFO would undoubtedly have a number of complex issues to analyze and a number of important decisions to take.

However, a CFO that takes the assertions of implementation of GST by 2016 at face value would risk repeating the experience of 2009. The key drawback of an early implementation of a company’s response to GST would be that a company would have to undo whatever it has done if GST does not get implemented on the expected date.

One of uncertainty of GST that even actual rates are undecided. India 13th finance commission, a governmental panel that recommends sharing of tax between state and federal government , a combined rate of 12 % - 5 % for central government and 7% for states. By comparison, the current rate of indirect tax levied in India amount to roughly 20% and can be much higher. News has come every time GST has likely to miss august 2012 deadlines. Parthasarathi Shome , one of the architects of the proposed goods and service tax, does not expect the government to implement GST regime before 2014 as the next Lok Sabha election may delay preparation for the eagerly awaited tax reforms. There are lots of issue which have not been resolved in GST… we are nowhere near IT infrastructure which has to be in place, it is important for implementation of successful GST. I don’t think implementation of GST from April 2013 is possible. There are many hurdles in between many states have concerns about constitution amendment bill particularly on the issue of state autonomy. The government was still hopeful of building a consensus. I am sure it will be resolved soon. ‘If it’s resolved, we implement it by 2013

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Lawcrux Advisors Pvt. Ltd. is a body corporate registered under the Companies Act, 1956. It’s a Indirect Tax Consultant cum ERP Software based IT Company in Delhi, India. It is a team of Chartered Accountant, Company Secretaries, Advocate and Retired Government Officials. The team of Lawcrux has been providing consultancy to many giant companies, MNC's and PSU's since the last fifteen years. Central Excise, Customs, Import Export Policy, International Trade and Service Tax are the fields of our expertise


Uncertainties in implementation of gst (goods and service tax) | GST