The last couple of months have seen unprecedented activity in the corridors of the Finance Ministry, the North Block, around the various meeting rooms of India Inc and on the Twitter feed of Dr. Subramanian Swamy. This has everything to do with the passage of the Constitution (One Hundred and First Amendment) Act, 2016 and the adoption of GST as the country's premier indirect tax regime. While the first two parties mentioned above have shown remarkable initiative to speed up the process, there has been deep furrowing of brows and anxious discussions in the third. Meanwhile, Dr Swamy, at his inimitable best, has pointed out that the entire GSTN network, which would be tasked to run the GST regime, is a problem and could even be a threat to national security. Various other parties, including but not limited to the IRS associations, have since joined in this bandwagon and demanded why executives in the GSTN should be paid bagfuls of money while poor government babus (with all their experience) are left to sort peanuts in office.
The progress of the GST has been on track so far but lack of Industry preparedness may cause delays going forward.
On a serious note, soon after the GST Bill was given the assent of the President on 8 September 2016 and notification of the various sections thereafter of the Constitution Amendment Act, interesting observations immediately tumbled out of the woodwork. Various press reports and (ill)informed experts went to town suggesting that the excise duty regime in the country had ceased to exist and India was now a tax-free country! The government, in response, took to Twitter to assuage such feelings and clarify tax positions. Significantly, no real initiative has emerged till date from the government to clarify important positions on tax rate, threshold limits and grey areas which now form part of the levy machinery and has numerous (in)formed stakeholders hawking their wares at every street corner. However, an important thread that has become the narrative now is the actual levy may get delayed to July 2017 or even later on account of lack of preparedness in the Industry, inadequate training of officials, and issues that are yet to be resolved by the recently set up GST Council.
Speaking of the GST council, which was notified on 12 September 2016, it's supposed to meet today (Thursday, 22 September). However, there seems little hope that in the initial meetings, contentious issues like tax rates, sharing of powers between Centre/ States and threshold limits will be addressed. Initial meetings will mostly set about administrative groundwork, such as rules of business, method of operations etc. Until the reports of the various sub-committees formed by the Empowered Committee of Finance Ministers are tabled, consensus or agreement really does not look feasible on pending issues. This could later be a catalyst for delay in the entire process if not addressed promptly.
Given all the above, there are two things that need to be kept in mind.
The first is the surprising speed in which the government is moving to make the law a reality, which has now taken Industry by surprise and has pushed them slightly on the backfoot. Its lack of preparedness may cause delays going forward. Still, it seems no obstacle is being considered big enough to impede the chugging of the GST train and the Finance Ministry has done everything in its powers to get things done on time.
Secondly, the Constitution Amendment Act has a transitional provision in Section 19 which makes the VAT laws in states valid until they are repealed or till one year from the commencement of the Act, whichever is earlier. This puts a necessary duty on the States to get their house in order before 15 September 2017 (this provision being notified effective 16 September 2016) to prevent complications. Hence, the Indian GST can carry on chugging for now but may have to speed up a little more when it passes around the bend in January 2017.