 "Union Finance Minister Arun Jaitley (centre) briefs the media on the meeting of the empowered committee of state finance ministers on GST, in Kolkata on Tuesday")
The Narendra Modi government is eyeing April 1, 2017 for the GST roll out, but many hurdles have to be cleared before the target, called stiff by Finance Minister Arun Jaitley, is met.
While the Constitution amendment Bill has become an Act now and constitution of the GST council has already been cleared by the Cabinet, several issues like tax rates, dual control of the Central and state tax officials over assessees, and exempted list of items are yet to be resolved. The GST council will have its first meeting on September 22 and 23.
A consensus seems to have been reached for a threshold over which GST would apply.
Revenue secretary Hasmukh Adhia recently said small traders having annual turnover up to Rs 25 lakh will be exempted from GST and the Centre and states are likely to agree to this limit. Some states had earlier demanded lower threshold of Rs 10 lakh a year.
However, a consensus seems tough on the dual control. States want powers to assess, scrutinze and send notices to assessees with annual turnover of up to Rs 1.5 crore to rest only with them.
Besides this, Centre and states also have to thrash out GST rates. While a committee headed by Arvind Subramanian had recommended standard rate of 18-19 per cent, lower rate of 13 per cent, and 40 per cent rate on demerit goods and 2-6 per cent on metals, some states had vehemently opposed it as their revenues would come down. Even as the Centre has to give full compensation to states for any revenue loss due to GST roll out for five years, states may not agree to these recommended rates.
In fact, Adhia was asked to rework the rates at a meeting taken by Modi with finance minister and his officials on GST preparedness.
However, another hurdle in the way is to find a consensus whether GST rates would be mentioned in GST Bills or finance acts.
Finding a broad consensus on exemption list may not be as difficult as it seems, since it is the Centre which has to bring down its exempted list of excise items from 300 to 90 which are there in various states excise lists. But, finding out what will be those items may take some time.
The GST Council has been given two months time to resolve all these issues.
Even if it is assumed that the Council has given its recommendations on all these issues, what is the guarantee that some states would pass their respective Bills on time. For rolling out GST in April, 2017 these Bills should be passed in the winter sessions, some time in November-December.
Two months time from September 21-22 means that the GST council would give recommendations by November 22. To make all the states pass the GST Bills on the basis of these recommendations by December 31 may not be as easy task, particularly when Tamil Nadu is so vehemently opposed to GST. After all, GST Council will give recommendations on the basis of 75 per cent vote and not cent per cent unanimity.
And then there is a challenge whether GST network will be ready by then to have a IT-backbone for GST. On Thursday Infosys CEO Vishal Sikka summed it up aptly that the roll out is a hell of a challenge. But, he also added that there is still time to address these challenges before the deadline. Infosys was tasked with building the IT infrastructure for GST.
The government may not want to push the deadline for GST further because the new indirect tax system is expected to be inflationary for initial one or two years. The closer it is to 2019 elections, the risks would be higher for the ruling regime.
