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GST

by CA. Sandeep Choudhary 

If you are getting ready for the Goods and Services Tax (GST), take a deep breath, Baba Ramdev style, and relax. GST is not going to come into force from 1st April 2016, irrespective of what the Government of the day claims.

To begin with, there is the easy part: writing down the law. 

You first need to pass the bill for amending Constitution amendment bill in both Houses of Parliament. (No, you can't call a joint sitting for a Constitutional Amendment). 

Then get the bill ratified by at least
half of states. 

Then comes the formation of the GST Council (consisting of the Union Finance Minister, his deputy and the state FMs). This Council will be immediately faced with the critical issue of determining what the GST rates (or bands of rates, or floor rates) will be. This, and all other matters, such as decision on which taxes are to be subsumed in GST, has to be passed by three-fourth majority (Central Government will have one-third of voting power). 

Let us assume for a while that all this will happen breezily. 

Now, you need to pass the Central GST and Inter-state GST bills in Parliament. This will subsume (not wholly, but substantially) Central Excise Act, 1944 and Chapter V of Finance Act,1994 (a.k.a. Service Tax legislation). Meanwhile, the GST Council will come up with a model State GST Bill for the states. Then, each state will pass the State GST bill in their respective legislature. 

After the basic law is in place, the detailed Rules and Regulations governing technical nitty-gritty and Forms will have to be issued by both Centre and the States. 

At this point, you may be wondering if we have enough time, and political sagacity, to write the law by 1st April 2016. We do not even have a timeline yet, for each of the steps. 

Today, on 17th June 2015, the Govt. has formed two committees, one to monitor progress on these issues. And another to recommend possible tax rates. So, lets assume they can come up with a timeline. And stick to that timeline. 

If they can stick to the timeline, they would have covered the easy part: writing the law. 

By this time, we will be putting in place IT systems to handle the Inter-State GST. And training the Tax Officers in the new law. All this is also quite easy. 

At some point in the game, the TRADERS will wake up and realise what GST means. And all hell will break loose. 

That's the fun part. The chaos against which the wrangling over legislation will look like a breeze.  

GST has been sold as a single tax. It is not a single tax. It is 3 separate taxes. A tax chain exclusively of Centre. A tax chain of States, with Centre as facilitator. And an additional tax on inter-state sales and services, collected by Centre for benefit of selling State. 

Currently, a trader bows before the state officers collecting VAT. He does not have to deal with central officers collecting Excise (and Service Tax).  Once GST kicks in, the Trader will have to bow before the Central authorities too. 

For the same sale, there will be two parallel valuations, returns, assessments, demands and appeals. One under the Central GST, the other under State GST. Manufacturers suffer this in the current regime, but not traders. 

And traders are the backbone of BJP. 

Parallel to the traders, service providers will realise that they will have to bow before State GST officers apart from Central. They will join in the fun. But it is the Traders that will be giving the Government sleepless nights. 

GST will not be a unified tax. It will not provide credit for all taxes on inputs. Big revenue generators- petroleum products and liquor, will remain outside GST. It will not remove the inter-state barriers which force large chunks of inter-state trade underground. It will not make India a unified market. 

And it will dramatically INCREASE the cost of compliance for traders and service providers.

What happened to 'Ease of Doing Business', they will ask. 

I suppose Arun Jaitley Ji will be a worthy successor to Pranab da, but that is another story. 

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