UDAIPUR/NEW DELHI: Prospects of a rollout of the Goods and Services Tax (GST) by July 1 brightened with the GST Council approving on Saturday a draft law that seeks to compensate states fully in case of revenue loss as a result of the tax reform. The council is now expected to approve three other laws when it meets on March 4-5, paving the way for the legislations to be brought to Parliament by around March 9.
The decision on categorisation of goods in tax slabs is not part of the law and will be worked out by the council after the enabling laws are passed. Briefing reporters after a meeting of the council, finance minister Arun Jaitley said he expected the panel to approve the C-GST, I-GST and S-GST laws at its next meeting in Delhi.
“It’s essential that enabling laws for GST are passed in the second half of the budget session to ensure rollout from July 1,” Jaitley said.
The approval to the draft compensation law is read as a positive development as it was a contentious issue, improving the prospects of the ambitious indirect tax reform meeting its latest July 1 deadline. Parliament has been subject to disruptions and the heated poll rhetoric in the midst of assembly elections can be a worry.
However, political differences over demonetisation that hampered negotiations seem out of the way. Rollout of GST has missed several deadlines in the last 10 years but now most contentious issues have been resolved. GST is an indirect tax that will replace a raft of levies such as excise duty, service tax, and value added tax (VAT). It is expected to simplify the tax structure, broaden the tax base, and create a common market across the country.
The FM said once the legislations are approved by the council the next step would involve determining which commodity to be categorised under which slab. “One major meeting of the GST Council required to give approval to putting goods and services in different tax slab,” the FM said. Tax experts said approval of the compensation law augured well for GST rollout on July 1.
“The approval of the compensation law by the GST Council is a very significant development as it was one of the most contentious issues. This paves the way for approval of other legislation necessary for GST rollout from 1st July,” said M S Mani, senior director at consultancy firm Deloitte Haskins & Sells LLP. “It is now necessary to bring more focus on the outcome of the rate fixation exercise as business can prepare only if the rates are known,” Mani said.
Credits ET Realty