History has proved that passing a major Act in India is a multi-year project that often yields no result. In many instances, the Act that is finally passed is a watered-down version of the original plan and the efflux of time between the thought and the deed ensures that the Act that is finally passed does not take into account the latest developments.

For instance, the Companies Act, 2013 was passed after ages but the strict provisions therein are now being watered down through rules and notifications. Indeed, we could be in a situation soon wherein rules and notifications overpower the Act.

Similarly, the introduction of International Financial Reporting Standards (IFRS) in India was conceived in 2009, but it is yet to see the light of day. In his Budget speech, Finance Minister Arun Jaitely announced that it would be introduced in a couple of years from now.

In the interregnum, the Companies Act was amended to segregate all assets and liabilities into current and non-current and depreciation on fixed assets was to be charged on useful lives instead of prescribed rates — all key requirements of IFRS. India is complying with IFRS, in bits and pieces.

GST’s ghost

The Goods and Service Tax (GST) is a piece of legislation that could certainly be a game-changer in India if implemented correctly. This is because the Acts that GST subsumes — Central Excise, Customs, VAT and Service Tax are today mired in litigation and interpretational issues leading to taxpayer ennui.

But GST in India may be eternally delayed due to the fact that the Centre and the States control some of the taxes that GST seeks to subsume and they would not want to let go of their respective fiefdoms. States, on their part, already sought compensation for their expected losses.

In the latest round of talks, States demanded complete control over small traders in the new tax regime. They also stuck to their earlier demand of keeping the entry tax, petroleum and alcohol out of GST purview and making a provision in the Constitution Amendment Bill to compensate States for revenue loss after the new indirect tax system came into force.

It was also decided that the common threshold for levy of GST would be kept at ₹10 lakh (₹5 lakh for special-category States), against ₹25 lakh proposed by the sub-committee. Many years ago, it was decided to gradually phase out Central Sales Tax (CST) in India. However, CST still exists, albeit at half the original rate, because the States feel that the Centre has shortchanged them of ₹34,000 crore of compensation that was promised.

Old is gold?

It is apparent now that the GST that will eventually show up in India would not be an ideal GST but a compromise. The Government should pause for a moment and mull over whether a compromise would be worth the time and effort. Despite the inherent inefficiencies, all indirect taxes have not posed any major challenges — service tax is turning out to be a cash cow for the Centre.

A half-baked GST would only turn out to be a new name for old laws. None of the existing controversies would be settled just by bringing in a new law for the sake of it. The options before the Centre are two-fold — either bring in a game-changing law by overcoming all challenges, or continue with the existing laws by cleaning up inefficiencies.

With each passing day, it looks like the latter is the sane choice.

The writer is a chartered accountant

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