Now that the government has set a date

The finance minister chose to give a very clear message on the Goods and Services Tax in his speech. He said, “GST is expected to play a transformative role in the way our economy functions. It will add buoyancy to our economy by developing a common Indian market and reducing the cascading effect on the cost of goods and services. We are moving in various fronts to implement GST from the next year.”

The choice of words carries a clear message: the Centre is committed to ushering in GST on April 1, 2016. This Budget focuses on the revival of growth and investment in India. The government wants to bring in efficiency in the tax systems and focus on ease of doing business. GST has been identified as one of the potential game-changing reforms to catalyse this.

Several positive steps have already been taken towards the introduction of GST in India. The Bill to amend the Constitution with respect to GST was placed before the Lok Sabha in December 2014. Now the Centre needs to align key stakeholders to get approval in Parliament and then by the legislatures of half the 29 States. This should be accomplished latest by the monsoon session if the April 1, 2016 timeline has to be met.

Then there is the GST network. Planned as the backbone in terms of taxpayer interface, tool for regulators, and revenue allocation mechanism for inter-State transactions; this will be the key for implementing a successful GST. The entity has been set up and is soon expected to roll out an RFP (request for proposal) for development of the system. Getting the GSTN in place on time may become one of the items on the critical path to achieve the target.

Once the Constitution is amended, the GST council will take over the responsibility of every matter concerning GST. This team will have to get going from day one. The council should release the exposure drafts of regulations and plan for time to be allocated to receive industry feedback before finalising .

Matters such as what shall be the applicable rates for goods and services, structure of the regulation for determination of place of supply of goods and services, availability and applicability of exemption (if any) and of zero rating of exports, are required to be addressed at the earliest. Clarity is required on the kind of compliances that would have to be met by industry across India in relation their operations.

GST is a very significant change; one would expect the government to take on board the suggestions of trade and industry before crystallising the final set of regulations. Each industry may have its unique set of issues and requirements; all these should be duly considered and appropriately incorporated.

Clearly, post this phase, industry will need time to prepare itself adequately for the implementation of GST. It is a change that has the potential to impact businesses significantly; it may require the redesign of supply-chain models, review of costing, pricing, cash flow, process and technology-related aspects. Not only would the implementation of GST result in re-tooling the tax administration structure, it would essentially require communication, training and preparation by industry as well as the government.

On the whole, Budget 2015 has sent out a strong message — that of the government’s plan to introduce GST by April 1, 2016. The expectation now from the government is to work single-mindedly to achieve this, paving the way for the much awaited transformation in the indirect tax regime.

The writer is a partner (indirect tax), EY India. The views are personal

COMMENT NOW