More Delays for GST in India

December 7, 2010 Taxation in India

Indian flag on the beachIndia has seen another delay to the implementation of its controversial Goods and Service Tax after a significant number of politicians opted to boycott a critical meeting regarding the tax, in an effort to protest the proposal.

On December 6th a meeting was scheduled to be held between the Central Board of Excise and Customs of India and the Finance Ministers of each Indian state, in order discuss legislative changes required in order to implement the proposed national Goods and Service Tax (GST). However, the crucial step concluded with no tangible results, as all ministers representing states governed by theBharatiya Janata Party (BJP) opted to boycott the meeting. To instate a national GST system the Government would be required to make overhauls to the country’s tax legislation. The process would necessitate near-unanimous support from all political parties, something that is yet to be reached.

The new GST system was envisioned to break down economic barriers between states and create a more unified economy through a common consumption tax system. However, the BJP has repeatedly opposed the tax and claims of its benefits, saying that the GST system would only serve to strip states of their fiscal autonomy, and endow the Central Board of Excise and Customs with far-reaching tax collection powers by bypassing state-level tax authorities.

Several political commentators have claimed that the BJP’s opposition to the new GST system is not at all economic and is merely held as a political weapon to be used against the Indian National Congress (NIC) party. Some officials who attended the meeting have approached the media under the condition of anonymity, claiming that the GST struggle could eventually be used as a bargaining chip in future political disputes between the NIC and the DJP.

Photo by Matthieu Aubry.