GST may not keep date with April next year

The Centre may delay the rollout of the unified goods and services tax (GST) by at least a year, with many state governments raising reservations about the feasibility of the April 1, 2010 deadline. It is contemplating a new road map for rolling out GST, which is aimed at unifying the fragmented Indian market by getting rid of multiple state-specific levies and differences in tax rates, a government official said.

The governments of Madhya Pradesh, Chhattisgarh and Tamil Nadu have cautioned against rushing the rollout of the new tax regime, said the official, who asked not to be named. The Centre will take a final decision on having new timelines in consultation with the empowered committee of state finance ministers, said the official, who is privy to the development.

Incidentally, tax experts had warned the government against the hurried implementation of the new tax regime.

The proposed GST will integrate most of the indirect taxes on goods and services at the state and central levels. Indirect taxes are those where the incidence of tax is usually not on the person who pays the tax. These are largely taxes on expenditure and include value-added tax (VAT), excise and service taxes. GST will bring all these taxes under one head that will be levied at the point of sale, instead of the point of origin.

The empowered committee, which has been entrusted with the job of formulating the GST structure, has set a deadline of August for finalising the same. However, experts say even after the nitty-gritty of the structure is finalised in August, the drafting of legislation and rules and the enactment of the law will take time.

“They should have been drafting the law by now. They have not started work yet. It takes 3-4 months. As of now, nobody in empowered committee is even working full time on this. You can’t have a major tax law like this,” said Ernst & Young partner Satya Poddar.

Added PwC indirect tax practice leader S Madhwan: “We are far away. If there is sufficient interest and if everyone puts their shoulders to the wheel, it can be done. But I’d rather favour having a delayed better product instead of a having a half-baked product on time. At present, we do not even know about aggregate rates.”

Source : Economic Times - Gurgaon, Haryana, India,  dated 29/06/2009