India signals flagship tax reform on track as timing questioned

NEW DELHI: India’s government has signaled it would press ahead with the roll out of a goods and services tax (GST) on July 1, pushing back against speculation it’s consider delaying the launch of one of its flagship reforms.

“The rumours about GST implementation being delayed are false,” revenue secretary Hasmukh Adhia ( pic) said in a Twitter post yesterday. “Please do not be misled.”

A senior government official and a state tax department official, who both asked not to be identified discussing private matters, also said there were no plans to delay GST’s implementation.

Adhia’s comments come less than three weeks before India launches its biggest tax reform since independence in 1947, following a decade-long effort to simplify a web of taxes, regulations and border levies into a unified GST.

Prime Minister Narendra Modi’s government has said that the tax may bolster growth as much as two percentage points.

Still, three state government officials said there were teething problems at the state level getting ready for the GST, and they believed there was some chance of it being delayed.

A final decision on whether to proceed was likely after the next GST council meeting on June 18, the three officials said, asking not to be identified because the discussions are private.

Separately, two federal government officials said the finance ministry hoped to be at least 80% prepared for the GST launch, and it was possible there would be some initial flexibility around company tax filings for a few months. They cited internal discussions and also asked not to be identified.

Indian television channel ET Now tweeted June 8 that the government may treat the period between July 1 to March as a “transition period,” citing government sources, while the state of West Bengal has called for a delay to ensure everyone is prepared.

The All India Manufacturers Association, which represents close to 100,000 small- and medium-sized businesses, said it has sought three more months from the finance ministry on behalf of its members.

“It is impossible for any industry to suddenly change their tax structures and pricing modifications,” KE Raghunathan, AIMO’S president, said over phone from Chennai.

“It will only subject us to chaotic situations, confusion and losses.”

There is a possibility that the government would delay the roll out though it “seems quite firm” on its July 1 deadline at the moment, said Pratik Jain, a partner at PwC and the national leader of the firm’s indirect tax group in India.

The government may push ahead with the July implementation, but relax initial filing requirements, he said.

“The question is, are the smaller businesses as ready as they could be?” he asked.

“The answer is obviously no.” – Bloomberg