DNA Edit | GST birth pangs: Teething issues hindering smooth implementation

With the July 1 deadline for GST inching closer, teething troubles on implementation have started popping up across the Indian economy.

A host of accounting and policy challenges faced by the states as well as market domains means that the pressure on the Centre to push the date of introducing GST to September 1 has started piling. Reportedly, the migration of assessees on to the GST platform has been largely lacklustre, and worryingly behind schedule.

With the exception of southern states, only 70 per cent of the assessees have enrolled their businesses for registration under GST. In fact, one of the lowest levels of migration to GST is from the service tax silo. Only 45 per cent of the extant service tax payers have migrated to the new tax regime under which the entire universe of central and state indirect taxes in India will be subsumed.

The recent meeting of the representatives of the GST Council has fired up some sectors like the FMCG on the assurance of lower rates, while the automotive sector seems sullen as the segment has been put in the uniform tax slab of 28 per cent. Adding to the cost will be a cess ranging from anywhere between 1 per cent and 15 per cent which will be decided on the basis of the size of the car.

Naturally, the automotive segment is unhappy and so are other domains like pharmaceuticals, SMEs, telecom and consumer electricals, which are up in arms about the rates or the lack of clarity in the implementation of the game-changing reform.

Research on GST from other countries indicates that it has contributed to a spike in inflation in the first few years. Pricing pain is here to stay for some time but if in the bargain, India secures a simplified tax framework that increases accountability and augments indirect tax revenues, the pain would be worth it.

As we criticise the government, one should not lose sight of the fact that this is an exercise in economic cooperative federalism, the likes of which have never been seen in India. However, the Centre cannot sit pretty on its achievements.

It will have to move pro-actively in anticipating the grouses of multiple trade associations and quell them before these problems assume a disruptive form. Another fear dominating the corporate world is that GST will be creating new troves of litigation as a lot of tax discrepancies have crept up in the small print.

Already, the currency of tax consultants has been on the rise from the time GST has caught on with popular imagination. On June 11, the GST Council should come to a definitive answer on whether the tax reform can go live by the next month or by September.