Government eyes GST roll-out by 1 April 2017

The government expects to roll out the new goods and services tax (GST) regime in April 2017, a year after the scheduled roll-out planned earlier, senior finance ministry official said after the Rajya Sabha passed the Constitution Amendment Bill, a key enabling legislation for introduction of the Integrated GST bill.

Revenue Secretary Hasmukh Adhia said he expects a majority of states to ratify the constitutional change in the next 30 days, allowing a new GST Council to finalise legislations that will set the rate and other terms of the tax.

Adhia, however, said it would be "premature" to expect the GST's standard rate to be 18 per cent, as proposed by the government's own chief economic adviser, saying this would imply significant revenue losses.

As of now most revenues came from indirect taxes like excise duty and value-added tax whose standard rates, taken together, add up to a tax burden of 27 per cent for businesses selling goods. The GST rate would be much below that as per the finance minister's own admission.

"Revenue neutrality has to be maintained," Adhia added.

Once implemented the biggest tax reform in independent India would transform its $2 trillion economy into a common market of 1.3 billion people.

However, bringing the 1.3 billion population is a daunting task considering the need to train thousands of people and setting up of necessary IT infrastructure in a span of 6-7 months.

Revenue secretary's GST Roadmap includes establishment of legal framework, preparation of IT infrastructure, change management, training of officials and staff, outreach and consultation with trade and industry and target date of GST roll-out 1 April 2017.

Establishment of legal framework

  • Passage of the Constitution Amendment Bill from parliament: First week of August 2016
  • Ratification by 50 per cent states
  • Presidential assent of Constitution amendment and notification in official Gazette
  • Cabinet approval for formation of GST Council
  • Recommendation of model GST laws by GST Council
  • Cabinet approval for the CGST and IGST laws by centre and for SGST laws by all states
  • Passage of CGST and IGST laws by the centre and passage of SGST laws in all states: Winter Session 2016
  • Notification of GST Rules

Laying of IT infrastructure

  • Goods and Services Tax Network (GSTN): Not-for-profit, non-government company to be set up by the centre and states to provide shared IT infrastructure and services to central and state governments, tax payers and other stakeholders;
  • Frontend processes: Common modules for registration, returns and payments being developed by GSTN;
  • Backend processes: Modules for backend processes of tax authorities such as processing registration/returns, assessments, audit, appeals, etc;
  • Development of GST frontend and backend for 17 states by GSTN: End December 2016;
  • CBEC's backend systems: End November 2016;
  • Backend systems of 14 states: End November 2016;
  • Backend systems of Pr CCA, banks, RBI and state accounting authorities: End November 2016;
  • Testing and integration of GST frontend and backend of all stakeholders: Jan–March 2017;

Change management

  • 60,000 officials of central and state governments to be trained on GST laws and IT framework: till lowest level assessing officer in states and centre
  • Training on GST Laws:
  • Phase I: Source trainer's workshop (25 officers) – completed;
  • Phase II: Master trainer sessions (350 officers) – till mid-August 2016;
  • Phase III: Trainer sessions (1,000 officers)– till October 2016;
  • Phase IV: Last leg training sessions (60,000 officers): end-December 2016; and
  • Training on GST IT systems: To be held in similar pyramidal structure by GSTN: December 2016–March 2017.

Outreach and sensitisation for trade and industry:

  • Stakeholder consultation and outreach workshops to be organized across the country – have already started with Hyderabad and Jaipur
  • To be completed by March 2017

Registration

  • Existing dealers : No fresh registration needed for existing dealers. Existing VAT/Service tax/Central Excise dealer data to be migrated to GST system.
  • New dealers : Single application to be filed online for registration under Goods & Services Tax (GST).
  • registration number will be PAN based and will serve the purpose for centre and state.
  • Each dealer to be given unique id GSTIN
  • Registration to be granted within 3 days.
  • Post registration verification in risk based cases only.

Filing of returns

  • Common return would serve the purpose of both centre and state government.
  • Most average tax payers would be using only four forms for filing their returns. These are return for supplies, return for purchases, monthly returns and annual return.
  • Small taxpayers: Small taxpayers who have opted composition scheme shall have to file return on quarterly basis.
  • Filing of returns shall be completely online.
  • All taxes can also be paid onine.

Major challenges

  • Calculation of revenue base of centre and states, along with compensation requirements of centre
  • GST rates structure
  • List of exemptions
  • Forming of consensus on Model GST Bill
  • Threshold limits
  • Compounding limits
  • Cross empowerment to mitigate ill-effects of dual control.