India’s Cabinet Clears Four GST Bills; Next Stop Parliament

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By Siri Bulusu

India’s cabinet approved four goods and services tax bills that may be introduced in parliament as early as March 21.

The four bills—Central GST bill, Integrated GST bill, Union Territory GST bill and Compensation bill—were approved by India’s cabinet March 20, moving the pan-India tax closer to roll-out by July 1, 2017.

While the GST bills are ready to be presented before parliament, the final operational rules and product and service rates haven’t yet been decided by the goods and services council.

“The decision on rates and rules will be carried out parallel to parliament’s approval of the bills,” Amitabh Khemka, chief operating officer of Sthir Advisors LLP, a professional services firm specializing in Indian indirect taxes, told Bloomberg BNA March 20.

While the bills grant authority to state and federal level authorities to levy the goods and services tax, the operational aspects of the tax are presented in the GST rules, which are yet to be finalized.

Rates Discussion

Goods and services are expected to be assigned to finalize the rates and GST rules at the next council meeting on March 31, Khemka said, adding that state finance ministers could have vested interest in local goods and use that as leverage when bargaining operational terms.

A stalemate between state finance ministers and the federal government regarding administrative control over taxpayers caused implementation of GST to be deferred by three months, to July 1, 2017.

In January 2017, the state and federal governments reached consensus on the matter by equally splitting revenue from taxpayers earning over 15 million rupees ($220,000), while companies earning below 15 million rupees will be distributed 90 percent to states and 10 percent to the federal tax authority.

No Central Registration

The mechanism for how taxpayers will be assigned to either state or federal tax officers has not yet been established, and companies with pan-India operations are hoping for a single point of assessment to ease the compliance burden.

“There will be no centralized registration for companies with pan-India operations,” Divyesh Lapsiwala, Mumbai-based indirect tax partner at Ernst & Young LLP, told Bloomberg BNA March 20.

Lapsiwala said while state-by-state registration will be required, there is currently discussion on how state and federal tax authorities can create a single assessment point for tax payers providing goods and services across the country.

Parliament Approval Next

The goods and services tax bills awaiting passage by India’s parliament are:

  • Central Goods and Services Tax Bill, 2016, which proposes legislation on taxes levied on goods and services old within a state;
  • Integrated Goods and Services Tax Bill, 2016, concerning legislation on taxes levied on goods and services sold across state borders;
  • Union Territory Goods and Services Tax, which will authorize state-level legislatures that govern union territories to levy GST; and
  • Compensation for Loss of Revenue Bill, 2016, which sets out legislation on compensation to states for loss of tax revenue for five years following implementation of the GST.

The State Goods and Service Bill requires approval by legislative assemblies in each state, while the remaining four require parliamentary approval as a “money bill.”

A “money bill” is first presented before India’s lower house before going to the upper house for a period of 14 days, after which it returns to the lower house for final passage.

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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