What began as a good initiative way back in 2000, still lingers on in the political tussle at the centre and is far away from being implemented. Yes, we are talking about the Goods and Services Tax which is stuck up in the RajyaSabha as the 122nd constitution amendment bill. The Congress party led the washout of the Monsoon session of the Parliament and they are still not in favour of the passage of the GST bill during the Winter session in Dec 2015. This is despite the fact that their major demands with regards to the GST bill were addressed by the Subramanian panel report in the beginning of December.
A long road lies ahead after the bill is cleared by both the houses of Parliament. The LokSabha had cleared it in May 2015, while the RajyaSabha where the opposition holds a greater strength is holding it back since then. After the RajyaSabhaclears the bill,it will have to be ratified by 50% of the states, followed by the approval of the President of India.
The Modi led BJP government is pushing through for the passage of the bill and is trying to rope in the opposition to discuss and reach a consensus on the passage of the bill. They are also ensuring that most of the parallel activities are carried out in the stipulated time frame and are ready before the implementation date. These include the report of the select panel on the revenue neutral rate and the functioning of the GSTN network.
Most of the industry in India is more or less convinced that the GST in India is going to be a reality by the year 2017. The automobile, white goods, pharmaceutical, logistics, trading and servicing industry etc. have already started the preparation for incorporating the tax reforms. Many of them who are availing various types of exemptions are putting up their representation to the governmental bodies involved in the GST formulation, for continuation of their subsidies.
The onus of formulating and bringing out the GST guidelines for implementation will lie with the GST council that will come into action as soon as the constitutional amendment is passed. The council will take a period of almost 3 to 6 months to come out with the considerations for implementation of the GST in India.
The GST is a consumption based tax on the destination principle. The tax will finally accrue at the point where the goods are supplied or the services are delivered. At each stage across the value chain the differential between the output tax and input credit will become payable. Initially the cost of goods and services might go up due to higher tax amounts and may generate some inflationary pressures. However, the net burden of having to pay these taxes is likely to reduce.
The uniformity of the taxation rule across the whole nation will be beneficial for the businesses as they have to grapple with the different taxation rates across the states at present. They will also benefit from the discontinuation of cascading of taxes or dual taxation at the hands of the centre and states under the current scenario.