The finance ministry is ready to roll out the new indirect tax regime for goods and services in 2016, even as an > impasse in the Upper House of Parliament has prevented constitutional amendments to enable the new taxation system.
By January 2016, the ministry expects to finalise a draft model law for state governments to adopt the Goods and Services tax (GST) system that would replace multiple excise, sales and octroi duties levied on inter-State and intra-State trade of products and help make the country a single market, according to the ministry. The ministry also expects to have the IT network in place next month to manage the transition to the new regime.
But to get to that stage, the Constitutional Amendment Bill for GST needs to be passed with a two-thirds majority in the Rajya Sabha and then be ratified by at least 15 state assemblies to become law of the land.
A GST Council with representatives from the Centre and the States would then be formed, following which states would have to enact their own legislations to enable the actual switch to the GST regime.
On Monday, Union Finance Minister Arun Jaitley conveyed to Congress leaders that the government is open to accommodating two of its three key demands to allow the Bill’s passage.
Special Secretary in the Department of Revenue Rashmi Verma also indicated that the Centre was open to dropping the proposed one-per cent additional tax over the GST rate for manufacturing states. This is one of the three Congress demands on GST and was endorsed by a government-appointed panel headed by the Chief Economic Advisor, Arvind Subramanian, in a report earlier this month.
“If after consulting various groups, political parties and trade and industry it is felt that we should drop this one per cent, we are open to it and definitely I also agree that with the one per cent (additional tax) going, the GST structure will improve considerably,” she said on Tuesday.
Infrastructure On the Centre’s preparedness for rolling out the GST in 2016, Ms. Verma said: “We are fully geared towards rolling out of GST in 2016, our IT infrastructure is going to be in place… we have finalised the draft business laws which have been approved by the Empowered Committee”. The IT processes, she said, will be ready by the end of January.
Ms. Verma said that the Ministry was going through “a huge tedious and consultative process”, involving all states, to look at each clause minutely to be able to finalise the draft law for States.
“It is going to take at least another month by which we will be able to finalise the draft law and once that is done we will be putting it up in the public domain and process of consultation and regional conferences for interaction with trade and industry will be done,” Ms. Verma said after inaugurating an Assocham conference on the GST.
Mr. Jaitley told a television channel on Monday that in a meeting with the Congress leaders aimed at narrowing differences on the GST, he had offered to try to persuade the manufacturing states to agree to do away with the proposed one-per cent additional tax over and above the GST on the interstate trade of goods.
It has also been reported that at the meeting Mr. Jaitley offered a revenue neutral GST rate of 15 per cent to the Congress.
Central Board of Excise and Customs (CBEC) Chairman Najib Shah indicated that the third Congress demand regarding the dispute resolution mechanism could be a challenge: “We have to have uniformity between the centre and the states in the manner in which we handle disputes, we have to ensure that there is least amount of trouble for trade in having resolution to the disputes.”
Mr. Shah also emphasised that tax exemptions may not be the way to go forward in the GST regime. “So long as every tax which you pay across borders is VATable… so that the final product carries no input taxes… you should be comfortable… that really should be your aim rather than to look for any exemptions,” he said.