<b>T N C Rajagopalan:</b> GST shouldn't be a racing contest

Last week, the Goods and Services Tax (GST) Council approved the final draft of the Central GST (CGST) and Integrated GST (IGST) model laws to be placed before Parliament by the finance minister later this month. At its next meeting, the Council is expected to approve the final State GST (SGST) model law, to be placed before state legislatures in the coming weeks.

The Council also approved certain reliefs for the services sector, initially kept outside the proposed composition scheme for annual turnover up to Rs 50 lakh. And, retained the existing mechanism of Input Service Distributor to allow the flow of Input Tax Credit in respect of input services within a legal entity. Some matters remain to be resolved, such as the composition scheme for manufacturers.

The central government seems keen on GST implementation by July 1 or, if that is not possible, September 1. Obviously, the intention is to claim that it has pushed through a path-breaking tax reform that will significantly benefit the economy. Second, there might be worry that implementing of GST will necessarily mean some disruption and if so, it is better to let this happen much before the next election to the Lok Sabha, in 2019.  

However, there are well-meaning sceptics who appreciate GST’s potential benefits but wonder whether it would not be wiser to give business more time to adjust and roll out the new tax by April 1 next year. They do not see amending the Constitution again to facilitate delayed implementation as a major hurdle. In my view, they have a valid point.

The first draft model GST laws (SGST, CGST and IGST) were put up for comment in June 2016. After getting feedback from the trade, tax practitioners and officials, revised draft laws, incorporating many suggestions, were made known in November. Thereafter, taking account of various suggestions, the final GST model laws have been approved by the Council. These final drafts, not yet available in the public domain, will be known only when the Bills are placed before the legislatures.

Implementation of GST will mean amendments to various allied laws, such as the Customs Act, requiring approval of Parliament. The draft rules for registration, invoice, returns, payment and refunds, and the related formats, were put up on the website of the Central Board of Excise and Customs in November 2016. However, there are more rules that are yet to be notified. The Council has agreed to several rates of GST but is yet to agree on which goods or services will attract what rate. What types of exemptions will get notified and subject to what conditions is not known.  It is when all these details are available that business can work on amendments to software. Beside, it is desirable to have a six-month trial run of the on-ine GST network platform that will interface with the assessees, before GST is finally implemented.

Considering the pace at which the GST Council is proceeding, it is better not to rush implementation due to extraneous considerations.

E-mail: tncrajagopalan@gmail.com