The main opposition party indicated its support for several key reforms planned by Prime Minister Narendra Modi, including conditional support for the GST, on Monday (November 3).
“It is highly likely the winter session in Parliament will address the constitutional issue on GST,” Rohan Shah, head of tax at Economic Laws Practice. “A GST roll-out is most likely April 2016.”
Support from opposition parties is crucial for the reforms to be enacted, as Modi’s ruling party controls less than one fifth of the upper house of parliament, despite enjoying a majority in the lower house.
Indian finance minister Arun Jaitley said that he was “confident of introducing [a] revised GST constitution amendment bill in the winter session”, and that he was “targeting [the] winter session for [the] transfer of [the] first tranche of CST [central sales tax] compensation”.
A pan-Indian GST has been discussed for more than eight years, with the tax initially expected to be implemented in 2010.
However there has been significant resistance to the plans, with many of India’s 29 states and seven union territories voicing concerns that a country-wide GST could impact upon their state-level budgets.
“Some of the larger states feel that they have no incentive because they will not get the revenue they are getting right now,” said Sagar Shah, head of indirect taxes at BDO India. “Whatever the difference is in the first three years, the centre would recoup the deficit.”
“If that comes through I think the states will deal with it,” he added.
With opposition support and movement towards placating state-level concerns, plans for the tax can be expected to be developed fairly rapidly during the winter session, which runs from November 24 to December 23.
“If we have this in the winter session, it will move very fast. We are all waiting for this winter session,” said Sagar Shah.
The legislation would then develop over the next year and four months up until its likely introduction date of April 2016 although, given the amount of discussion around the tax and progress on the issue to date, another delay in its implementation cannot be ruled out.
Lawmakers would prefer to comprehensively modernise the entire tax code – another measure which has been planned for a long time but faced several setbacks – in conjunction with the GST, but with GST plans now moving quickly this may no longer be possible.
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