India Delays GST Until June 2012

June 29, 2011 Taxation in India

India Delays GSTAfter years of delays and debates, India is looking set to see yet another hold up to the implementation of a national Goods and Service Tax, as the government and state tax authorities fail to reach a consensus on the structure of the tax.

According to Sumit Dutt Majumder, chairman of the Central Board of Excise and Customs (CBEC) of India, the country is unlikely to meets its self-imposed April 1st 2012 deadline for implementing a new Goods and Service Tax (GST) system. At a press conference held in Kolkata on June 29th the Chairman explained that the new tax could be delayed until at least June 2012. Commenting on the practicality of the hold up, the chairman said that GST was a transaction based system and would not pose logistic difficulties if initiated part way through the financial year. He added that the CBEC has been cooperating with the country’s information technology sector to develop new software for the calculation and reporting of GST. The new systems are currently being tested in 11 states around the country, and would be implemented alongside the new tax.

The proposed GST system is intended to replace and centralize several taxes in India, including Value Added Tax (VAT) structure, national and local service taxes, and several excise taxes. Implementation of the tax has been under debate for several years in India, as the CBEC and state tax authorities have repeatedly failed to reach an agreement on how the GST system would affect state tax revenue distributions. When questioned on the final GST rate, the chairman said GST around the world is typically levied at between 16 percent and 20 percent, and India is likely to see a tax rate within this bracket. However, he added that the rate is yet to be finalized, and would depend on continuing discussions with state tax authorities, revenue forecasts, and negotiations on which currently existing taxes would be replaced by the GST system.

Photo by Saad.Akhtar