uncertainties in implementation of gst (goods and service tax) | gst
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Uncertainties in Implementation of GST (Goods and Service Tax)
One of the biggest tax reforms in India- Goods and service Tax is all set to integrate state
economies and Boost overall growth.GST will create single, unified Indian market to
make economy stronger. Finance Minister while presenting the budget on 6, July 2009
said that GST would come in effect from April 2010. The Finance Minister is willing to
implement GST from 1.04.2010. But till that day they have not decided on what goods
and service state will collect and on what centre. All time they are experimenting with
the taxation and for the same a lot of funds have been mis-utilised. One fine morning
NETA dreams to decorate all roads with the Flowers then whole government machinery
will run behind the dreams of NETA without thinking about the utility of same. Likewise
one has decided to implement GST all of them tried their level best but they failed to
understand whether the GST which is applicable in other country is also useful for our
country. When VAT was implemented many false promises are made by government
.which showed it as dream tax system. But till that date not a single promise has been
fulfilled. No local taxes like entry tax, Octroi etc. will be removed as promised in GST. It
will be more cumbersome, Harassing. There is lot of uncertainties in implementation of
GST.
The Goods and Services Tax (GST) was originally to be implemented in 2010. Until 2009,
no one took much notice, even though everyone agrees that the implementation of GST
is an extremely momentous and far reaching tax reform. Then, in 2009, everyone the
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media, industry and consultants of every stripe got extremely excited about this
reform that was just a few months away, at the time. However, GST was not
implemented in 2010, or in the next two years. The pendulum seems to have swung the
other way now. No one says much about GST and possibly with justification. There is
naturally a sense of fatigue after three false alarms. Possibly GST has been shelved fornow, with the Government having only two years left in its current term. However, at
some point in the future, possibly after the general elections, one can imagine that we
will be back in the 09 mode, with everyone gearing up for GST once more.
In the midst of this uncertainty is the CFO. He has to wade through the hype and take
sensible decisions on when to commit his company to making changes that are required
to handle the demands and opportunities posed by the new regime. Given the many
false alarms, what should the CFO do, when the hype starts once more. Is there any
clarity on when it is likely to be implemented? To try and provide some answers, one
has to first understand what happened in the past three years. Why is it that despite the
finance minister repeatedly asserting that GST would be implemented on April 1, 2010
(and then equally confidently announcing dates of 2011 and 2012), nothing has
happened. The answer seems to lie in the fact that the Constitution of India has to be
amended to provide a legal basis for the new law. Therefore, no matter what the
finance minister says, or for that matter, any other person says, GST implementation
cannot progress beyond the drawing board until the Constitution has been amended. It
appears that while efforts to amend the Constitution have been shelved for now, thereis a tremendous amount of work that is ongoing to prepare the information technology
systems and the draft law. Therefore, as and when a political consensus emerges, the
Government would be prepared to implement GST So sometime in the future, possibly
after the next general elections; talk of GST would start again. At some stage, the
Constitution would be amended. At that stage, industry would naturally drop its
skepticism, and believe that GST is going to become a reality. Lets say, for purposes of
argument, the Constitution is amended in 2015. The question is, Can be believe that GST
will become a reality in April 2016.
GST implementation requires not only amending the Constitution, but also enactment
of a state GST law by each of the states in India. Therefore, even after the Constitution
has been amended, the enactment of a law by a number of states is likely to be a
process that would take a minimum of two years .Based on the example given above;
we are talking about 2017 being the earliest date of implementation of GST. Closer to
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date, around the time frame of 2016, a CFO would undoubtedly have a number of
complex issues to analyze and a number of important decisions to take.
However, a CFO that takes the assertions of implementation of GST by 2016 at face
value would risk repeating the experience of 2009. The key drawback of an early
implementation of a companys response to GST would be that a company would have
to undo whatever it has done if GST does not get implemented on the expected date.
One of uncertainty of GST that even actual rates are undecided. India 13th finance
commission, a governmental panel that recommends sharing of tax between state and
federal government , a combined rate of 12 % - 5 % for central government and 7% forstates. By comparison, the current rate of indirect tax levied in India amount to roughly
20% and can be much higher. News has come every time GST has likely to miss august
2012 deadlines. Parthasarathi Shome , one of the architects of the proposed goods and
service tax, does not expect the government to implement GST regime before 2014 as
the next Lok Sabha election may delay preparation for the eagerly awaited tax reforms.
There are lots of issue which have not been resolved in GST we are nowhere near IT
infrastructure which has to be in place, it is important for implementation of successful
GST. I dont think implementation of GST from April 2013 is possible. There are many
hurdles in between many states have concerns about constitution amendment bill
particularly on the issue of state autonomy. The government was still hopeful of building
a consensus. I am sure it will be resolved soon. If its resolved, we implement it by 2013
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