The NDA government may have successfully piloted the legislation in Parliament for rolling out the Goods and Services Tax (GST), but it now faces tougher challenges on two fronts — streamlining the IT backbone needed for seamlessly implementing the proposed tax norm and sorting out the anomalies that have been built into the broader contours of the Bill. This has to be done well in time to meet the targeted deadline of April 1, 2016 set for ushering in the new tax regime — touted as the biggest tax reform since independence that will lift GDP growth and increase tax revenues.
Officials across states that The Indian Express spoke to buttressed the point that though meeting the timeline might be “possible”, the biggest stumbling block is likely to be the imperfect structure of Constitution Amendment Bill that has been tabled in the Lok Sabha. Officials said that the additional 1 per cent levy for the origin states that has been incorporated in the Bill, primarily with the aim of bringing on board the manufacturing states (origin states) like Gujarat and Maharashtra, may prove to be one such distortion in rolling out a destination-based tax such as the GST.
“There is concern among states like Bihar, Orissa, UP and West Bengal that the divisible pool will reduce due to the one per cent levy. They are not comfortable with it and there is a sharp divide among them. They have not raised it with the Centre so far because the Bill is yet to be circulated among them,” a state government official said. By incorporating the demand of the origin states, there is also a concern that states like Punjab and Haryana may rake up issues of purchase tax again, another state official said.
Further, while the Bill may get an easy passage in the Lok Sabha, the Rajya Sabha would prove to be a tougher battle ground.
The Bill has to be passed by two-thirds majority in both the Houses and then ratified by 50 per cent of the state legislatures.
The preparedness of all the states varies widely when it comes to IT infrastructure. The GST Network (GSTN), the non-government, private limited company that is tasked with developing the IT infrastructure for the GST, needs cooperation from the states.
While many states including Maharashtra, Kerala, Gujarat, Karnataka, Andhra Pradesh are reported to be in a fairly advanced stage, states like Bihar, Orissa, UP, Delhi, Punjab, Madhya Pradesh and West Bengal are only halfway through the process of placing their systems online.
The final integration with the common GST portal will happen only after the GST laws of both the Centre and states are ready. The three sub-committees of the empowered committee of state finance ministers which are working on the GST model law are yet to finalise it. “It would be ready only by next March. Though we hope that by May-June states will finalise their respective laws and get approvals from their legislatures, it is likely to take longer,” another state government official said on the condition of anonymity.
A GSTN official, however, said that majority of the states have already moved to online registration and return filing while over 70 per cent job of migrating to the new format matching taxpayer identification number (TIN) with PAN is complete.
* The preparedness of all the states varies widely when it comes to IT infrastructure
* The biggest stumbling block is likely to be the imperfect structure of Constitution Amendment Bill tabled in the Lok Sabha
* The additional 1% levy for the origin states may prove to be a hurdle in rolling out a destination-based tax such as the GST
* The final integration with the common GST portal will happen only after the GST laws of both the Centre and states are ready