India will roll out its new indirect tax regime — Goods and Services Tax (GST) — as planned from July 1, but return filing rules will be relaxed in the first two months for businesses to adapt to new systems.
"We don't have the time to defer the implementation of GST," Union Finance Minister Arun Jaitley said after the 17th meeting of the GST Council on Sunday. The GST will tear down trade barriers and unify the country's economy into a common market by replacing a string of central and state levies.
As per the relaxation, traders will be allowed to provide details of inward and outward supplies for July and August by September 5. In the first two months, GST will be paid using a simple return form (GSTR-3B). The rules earlier required GSTR to be filed by the 20th of every month. No late fees and penalties will be levied for the interim period.
The Council also fixed 28 per cent GST for hotels with tariffs above Rs 7,500 per night. Hotels with tariffs between Rs 2,500 and Rs 7,500 will attract 18 per cent GST. The Council will meet again on June 30 to settle pending issues of the GST, a reform that has been more than a decade in the making.
The Council also said that state government-run lotteries will be taxed at 12 per cent.
The levy will be 28 per cent if lotteries are outsourced. The multi-rate structure of the GST exempts or imposes a low rate of tax on essential items, while the top rate of 28 per cent applies to luxury items.
The Council also cleared rules related to anti-profiteering, advance ruling, appeals and revision, assessment and audit. An anti-profiteering body will be set up in July for two years. It allowed a 30-day period to all new businesses to get registered from June 25 onwards.
The biggest tax reform in India since Independence is expected to shore up state and federal tax revenues, cool inflation and accelerate economic growth by 1-2 percentage points in the medium term. The official launch of the GST will take place on the midnight of June 30 and July 1 at a function in Delhi.
Kerala Finance Minister TM Thomas Isaac said that the GSTN (GST Network) was not fully prepared, but the state decided to take the risk rather than delay the rollout.
Sumit Dutt Majumdar, former chairman of the Central Board of Excise and Customs, the apex body of Indirect tax, said, "It's great to see GST happening, finally. My only concern had been a fully operational GSTN. That's not happening, and therefore, some compliance requirements like return filing and invoice uploading have been postponed. In the absence of a test run, my concern on GSTN remains."
Rajeev Dimri, Leader, Indirect Tax, BMR & Associates LLP, said, "The relaxation should significantly help in assuaging the concerns of inadequate readiness of GSTN and confirms that GSTN preparedness will not be a roadblock for the implementation of GST as was being anticipated by the industry."
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