GST set to miss next year deadline

NEW DELHI: The Union cabinet is expected to take up the Constitutional Amendment Bill on the Goods and Services Tax ( GST) in its meeting next week, although doubts persist that the comprehensive reform of India's indirect tax regime will keep its rollout timeline of April 1, 2012.

"The Bill may be taken up by the cabinet next week," a government official told ET.

In his Budget speech, finance minister Pranab Mukherjee had said that the government would introduce the GST Bill in the ongoing session of Parliament.

The government has been trying to introduce the legislation for the past four years but has been unsuccessful so far as many states, particularly those governed by the main opposition Bharatiya Janata Party, have opposed it. These states fear a dent in their financial autonomy if GST is implemented.

The centre has already made several concessions, including dropping union finance minsiter's veto, to get states to agree to the proposal.

However, the changes in the draft failed to mollify BJP-ruled states who are still opposed to the proposal.

The centre was keen to roll out both Direct Taxes Code and GST together from April 1, 2012, but the long process involved may make the task difficult.

Revenue secretary Sunil Mitra said at a CII function that the process of ratification of the constitutional amendment bill will take time and the new tax may not debut from April 1, 2012.

"...the (GST) legislation cannot be voted upon until the ratification is completed...there may be problem on the time factor," Mitra said.

The introduction of GST needs an amendment to the constitution to empower the centre to tax retail trade, give states governments the power to tax services and for setting up a council for resolving disputes.

At present, the centre can tax services and goods only at the factory gate. States can tax goods only at the retail level and do not have the power to tax services.

The bill, once introduced, will be referred to the parliament's standing committee, which is expected to give its report only by the winter session.

The government can present the bill for voting in Parliament earliest in the next Budget session after which it would have to be ratified by at least 50% of state legislatures, he explained.

After ratification of the constitutional amendment bill, the centre and state assemblies also have to pass the GST legislation and notify rules.