India Seeks Swift Comment on Goods Tax; Industry Pleads for Delay

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By Siri Bulusu

Companies operating in India have until April 10 to comment on the government’s draft rules of the pending goods and services tax ahead of its July 1 implementation date, but companies in India are pleading for a postponement of the rollout to allow them time to adjust to the new tax.

India’s Central Board of Excise and Customs published a set of nine “ GST Rules,” April 1, seeking comment from business and the public on details of the operational and compliance aspects of how the new tax.

Introduction of the goods and services tax will overhaul India’s indirect tax system by consolidating taxes levied separately by the federal and state level governments under a single system. The new tax regime aims to facilitate flow of goods across state borders and create a single point of administrative control for taxpayers.

The swift consultation, which closes April 10, will be followed by further consideration by the GST Council, a group of state-level finance ministers, for final approval.

“Given the fact that these rules are yet to be finalized and classification of products under various rate slabs is still unknown, industry has requested that [the Indian government] consider September 1 as the date of implementation,” Prateek Jain, direct tax committee chairman of the New Delhi-based Associated Chambers of Commerce, told Bloomberg BNA in an e-mail April 5.

The final GST rules are necessary for companies to begin adjusting their business operations to comply with the new tax, as it will alter a company’s fiscal outlook, supply chain management, legal contracts and IT infrastructure.

Additional Clarity Sought

Jain said additional clarifications are needed, but that the draft rules bring clarity on several critical aspects of the GST that will enable industry to begin planning for process and technology related changes.

“Overall, it is a positive step toward implementation of GST, as without rules, it was difficult to plan ahead,” Jain said, adding that the industry hopes several issues around valuation and input credits will be revisited.

The draft GST Rules, as named by India’s Central Board of Excise and Customs, are:

  •  Composition Rules
  •  Valuation Rules;
  •  Transition Rules;
  •  Income Tax Credit Rules;
  •  Revised Invoice Rules;
  •  Revised Payment Rules;
  •  Revised Refund Rules;
  •  Revised Registration Rules; and
  •  Revised Return Rules.

Industry comments will be reviewed by the CBEC, which is tasked with rewriting the rules and presenting them for approval before the GST Council at its next meeting May 18-19.

Anti-Profiteering Rule Missing

“In terms of what the rules cover, it is in line with what the industry expected, but there are some things missing including the anti-profiteering rule which was perhaps the most eagerly awaited,” Priyajit Ghosh, indirect tax partner at KPMG India, told Bloomberg BNA April 5.

The anti-profiteering provision was introduced by the Indian government to ensure that any tax benefit caused by GST would be passed on to consumers through lower priced goods and services, and not serve to benefit companies.

Ghosh said complying with the anti-profiteering requirement is “easier said than done.”

“Can a company discount one product and make another more expensive? What documentation is required? How will audits happen? All those details are completely missing,” Ghosh said.

On March 29, India’s lower house of parliament approved the Central Goods and Services Tax Bill, Integrated Goods and Service Tax Bill, Union Territory Goods and Services Tax Bill, and the Goods and Services Compensation to States Bill. The upper house may propose amendments to the bills before they are passed into law during the current session of parliament ending April 12.

To contact the reporter on this story: Siri Bulusu in New Delhi at correspondents@bna.com

To contact the editor responsible for this story: Penny Sukhraj at psukhraj@bna.com

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