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By Siri Bulusu
India’s president signed off on four central goods and services bills—a clear indicator that the government is determined to implement its first-ever sales tax regime by July 1, tax practitioners said.
President Pranab Mukherjee gave his assent on the Central Goods and Services Tax Bill, Integrated Goods and Services Tax Bill, Union Territory Goods and Services Tax Bill, and the Goods and Services Compensation to States Bill, clearing the final procedural task required from the central government.
Once implemented, the GST will create one of the world’s biggest single markets, replacing a web of levies that GST advocates say have made it harder for companies to operate.
India’s lower house of parliament passed the four bills March 29, and the upper house passed the bills April 6—leaving the final hurdle to state legislatures, which are required to approve the state goods and services bill within their jurisdictions.
Industry and trade groups have asked that the government postpone implementation of the GST regime to allow companies more time to update their IT infrastructure and consider business decisions based on the recently issued GST rules.
“Industries have been asking for extensions on time, but the government is insisting on not further delaying implementation past July 1, which is extremely ambitious as far as India is concerned, because there is so much preparatory work to do,” Anita Rastogi, indirect tax partner at PricewaterhouseCoopers Pvt., told Bloomberg BNA April 14.
The Goods and Services Council, a panel of state-level finance ministers, issued nine “GST rules” April 1, outlining the procedural and operational aspects of the new tax. A revised version of the GST rules and final categorization of goods within the GST tax rate brackets are expected to be finalized after the GST council’s next meeting May 18-19.
If the Indian government remains steadfast on the July 1 rollout, only six weeks would remain for companies to adjust to the new tax.
“Software companies said they need at least three months to develop new software that will enable companies to be GST-compliant, and so it’s becoming a hectic conversation between companies and their IT teams,” Rastogi said.
Software companies will resort to quick fixes to comply with all required GST reporting, Rastogi said, since the challenge will be to build the IT infrastructure and customize it for each business.
Some tax practitioners, however, say the GST rules are comprehensive enough to create IT infrastructure.
“There will be no IT challenge if the GST rates are introduced late in the game, if the architecture is ready in the meanwhile,” Amitabh Khemka, chief operating officer of Sthir Advisors LLP, a professional services firm specializing in Indian indirect taxes, told Bloomberg BNA April 14.
Khemka said the government will take industry representations seriously if clear justifications are offered, but the indirect tax laws will expire Sept. 15, meaning the goods and services tax regime can’t be delayed until all companies to catch up.
“The only thing the industry is waiting for is the rates for different goods and services, and the GST Council is having regular meetings to determine that,” Khemka said, adding that once the rate figures are released, it will only be a matter of plugging in numbers.
Industry and trade groups will continue to make representations to the government, hoping the tax will be adjusted to meet sector-specific concerns, but Khemka said companies shouldn’t count on a delay.
“Companies should gear up for a July 1 rollout and not assume the government will be sympathetic,” Khemka said. “The passage of GST by the president makes it quite clear the government is committed to implementation from July 1.”
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