GST to receive push in monsoon session

GST to receive push in monsoon session

By SHAILENDRA TYAGI | NEW DELHI | 16 July, 2016
The BJP-led NDA government would be making a last-ditch effort, preferably by taking all parties on board, for the smooth passage of the Goods & Services Tax (GST) bill in the monsoon session. Analysts feel that the consensus approach would at least reflect that GST, which seeks to unite India into a single unified market, also has a grand unified political support for it. To protect the poor from the higher taxes, Congress has been demanding a ceiling on the GST. It has been advocating a GST rate of 18% for all goods produced and services rendered in the economy.  “There is no problem if such a demand is accommodated in the subordinate legislation rather than in the constitutional amendment act” says Pratik Jain, Partner with KPMG India.  That way, the flexibility to change the rate as per the requirement of the time would be far easier.
If the GST does not happen in the monsoon session then the government might make one last try in July this year to implement it by April 2017. Failing which, the chances for its passage would well be buried till 2019 general elections. “As things stand now, there seems a 90% chance for the GST’s passage in the upcoming monsoon session” says Bimal Jain, taxation expert at A2Z Taxcorp LLP. He adds that the government should have some kind of understanding with the opposition parties that whatever rate is determined would be kept uniform for at least couple of years so that the prices do not shoot up. An average GST rate across the globe is 16 to 17%. “Since more than two third of India’s GDP comes from services sector, it is advisable to have 16 to 17% GST rate” says Bimal Jain.  
If the GST rate is eventually fixed at 18% (as demanded by the Congress and also advocated by government’s Chief Economic Advisor), then it would make services costlier by 3% as services currently are being taxed at 15%. 
Goods, however, would become cheaper as the taxes on the goods would come down from over 25% (currently) to just 17 or 18%.
Besides these issues, many feel that draft GST law is still very complicated and needs simplification. For example, if the government really wants to incentivize the small and medium enterprises, then the threshold exemption limit (from GST) for them should be raised from the proposed Rs 10 lakhs to Rs 25 lakhs. 
This would help create more jobs.  GST, which promises to simplify India’s indirect taxes while making tax compliances much easier, has been negotiating with India’s legislative complacency for over a decade now. Many foreign investors are waiting for its earliest passage before committing more investment into the country. 
 

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