GST rollout may be delayed to September 1

Goods and Services Tax (GST) bills may have reached the final lap with their introduction in the Parliament on Monday but informed sources told DNA Money the road from here to the final of the proposed unified indirect tax could get stretched with the government seriously looking at shifting the date of the new tax going live from July 1 to September 1.

This could be done to give industry more time to prepare for the new indirect tax regime and for further fine-tuning the GST bills.

Sources in the government and Central Board of Excise and Customs (CBEC), which will be renamed as Central Board of Indirect Tax and Customs (CBIC) from April 1, said there is an "informal acceptance" of the need to push back the GST rollout dead/span >

"There seems to be an informal acceptance of GST date being pushed to September 1 among officials in the finance ministry, revenue department and CBEC," said one of the souro spoke on condition of anonymity.

He said the government does not want to make an announcement now because it believes that it could slacken the pace of preparation by industry.

The exercise of finalising five draft GST legislations – Central GST (CGST), State GST (SGST), Union Territory GST (UTGST), integrated GST (IGST) and Compensation to states – by the GST Council, which comprises of finance ministers and officials from all states and is responsible for working out the broad contours for the draft bills, is slightly behind schedule.

This gives industry lesser time to prepare for the new tax regime. There have been representations by various industry and trade lobbies to the government for an extension of the GST deadline.

Another source said many leading industrialists have communicated directly to the Prime Minister Narendra Modi on various concerns relating to certain provisions in the draft bills.

Apparently, one of the reasons for the government to set up 10 working groups under tax officials to study various issues and come out with a report was that major corporate honchos had individually raised concerns with the Prime Minsiter's Office (PMO).

A senior CBEC official told DNA Money that due to the urgency of the matter, its notice was issued as an order and not a circular. The process of issuing a circular is long drawn as it has to be vetted by many bodies and thoroughly researched.

"On Friday morning, we were told that this communication has to go out by Friday evening. Some very senior industrialists – 8-10 of them – had individually written to the PM expressing their concerns on GST," he said.

The CBEC official said it was practically impossible for the teams to submit their report by April 10 as they have to engage with industry body and then come out with recommendations. According to him, it could get extended by a week or 10 days.

One of the major grouse of the industry is the multiple registration for service providers under the GST as opposed to the single registration under the current indirect tax regime.

The representation for single registration has come from service providers in the banking, insurance, telecom, transport, information technology (IT), travel, logistic and other sectors.

If single registration provision is not provided under GST, then service providers will have to maintain state-wise books of accounts instead of a single one and this could make compliance cumbersome.

"As far as service sector is concerned, they (industry) are justified in asking for a single registration. For them, the amount of tax they are paying has been increasing year-on-year and so there is no point in increasing their compliance challenges for paying the same amount of tax. The central government can collect the GST and divide the tax among various states," said M S Mani, senior director, Deloitte Haskins Sells LLP.

Similarly, there is also an issue on input tax credit (ITC) in the latest version of the bills wherein several services cannot claim ITC at all. These include outdoor catering services, premium paid on medi-claim or any other insurance cover by employees, transportation arrangement made by employees, etc.

It would be interesting to see how the government is able to implement the recommendations submitted by the GST working groups.

A source said it may require the GST bills to be amended if some of the recommendations are accepted by the GST Council.

The four of the GST bills are slotted for a seven-hour discussion in today's (Wednesday) ongoing second part of Budget session in the Lok Sabha. All the legislations are moly to become Acts in the current session, which ends on April 12.

The source believes that the working groups' recommendations may be taken up in Amendment Bills that could be taken up in the Parliament in Monsoon session, which would commence around end of May or beginning of June.

And once the Amendment Bills gets passed in the Monsoon session of Parliament, the new indirect tax could come into force from September 1.