Don’t sit on the GST
Parliament must pass the Bill this session as India cannot remain an assortment of several dissimilar markets
India’s plan to roll out a goods and services tax (GST) and create a common national market has missed several deadlines, including the last one of April 1. The next deadline looks to be set at April 1, 2017. Once adopted, the GST will dramatically alter India’s indirect tax structure by replacing a string of central and local levies such as excise duty, value added tax and octroi into a single unified tax and stitch together a common national market. But, the wait could get longer if Parliament fails to ratify the 122nd Constitution Amendment Bill in the monsoon session that began on July 18.
If Parliament fails to pass the Bill in this session, it will further delay the process of getting it ratified in at least half of the state assemblies. The Bill’s holdup until Parliament’s winter session, which usually runs till December-end, could mean most states will not be able to take up the legislation before their respective Budget sessions in February-March next year, the same time around which assembly polls in five states — Uttar Pradesh, Punjab, Uttarakhand, Goa and Manipur — are likely to be held. This will, in turn, push back the enactment of the supplementary and subordinate legislation that will have to be passed after the main central law is enacted. These include the state GST law, the central GST law and the integrated GST law. These are enabling legislation that are necessary for rolling out the new tax system.
Pending the passage of the Bill, the proposed GST council cannot be formed. This will delay decisions on rates and the structure of the dispute resolution mechanism. A delay in Parliament’s approval of the central law carries the risk of pushing back this process by a few months. In addition, it is also imperative to have a robust country-wide information technology (IT) network and infrastructure to make the implementation seamless. The IT network is still a work in progress, which has to be tested in the run-up to April 1, 2017 before its final rollout. The fiscal hurdles among states have kept away largescale investments in what should otherwise count as one massive, attractive market. But, for how long can India avoid the roll-out in its quest for an ideal GST model? India cannot continue to remain an assortment of several dissimilar markets governed by diverse sets of tax rules and rates.