Rollout of goods and services tax (GST) is not expected to happen until 2015, says Sachin Menon, Partner and National Leader, Indirect Tax Practice, KPMG in India.
This is despite Finance Minister P. Chidambaram’s pious wish and noble intentions in the matter, he said ahead of a KPMG Budget 2013 analysis event here.
The event was co-sponsored by the Asian School of Business and the Kerala State Council of the Confederation of Indian Industry (CII).
“GST is a huge work in progress and needs to comply with myriad targets and deadlines,” Menon told Business Line.
There is a lot more to it than one gets to see, he said with reference to the current state of general unpreparedness for an eventual GST rollout.
Massive requirements with respect to backend infrastructure and the IT backbone for the rollout leave a lot to be desired.
Training of employees and their redeployment is another major challenge that needs to be got over with.
This will in turn call for a comprehensive restructuring of the administration since a number of employees are likely to end up redundant after rollout.
But all these would not be enough if Parliament and State legislatures do not get down to business and do their part.
This pertains to amendment of the Constitution, drafting of the Bills and framing of rules and regulations, Menon said.
India is a federation of States and a GST rollout of cannot happen unless all of them get on board.
Every State and Union Territory would have to get the respective legislation passed in the legislatures.
They are concerned that a unified GST across the country with no questions asked would mean taking away their right to taxation.
They have legitimate fears that GST could this way mean a backdoor entry of a demon which could finish off their sovereign powers.
Currently, States do not have powers to tax services, this would have to be reversed and empower them through legislation.
Also, there has to be an effective dispute settlement mechanism in place to take up issues that may crop up after rollout.
All this will take quite some time given the pre-occupations of legislators both at the Centre and State.
“Even if we manage to achieve what is humanly possible in the short window in 2013-14, there are the general elections to contend with in 2014.
So it is safe to assume a 2015 timeline for any meaningful implementation of GST, if at all,” Menon said