India Tax Reform: Government Hopeful Of Passing GST Bill In Next Parliament Session

After months of “parliamentary obstructionism,” India’s Finance Minister Arun Jaitley expressed hope that the proposed goods and services tax (GST) law, the biggest indirect tax reform since the country's independence in 1947, will be passed by the upper house in the next session of parliament, according to reports. Originally scheduled to take effect from April 1 this year, the lower house passed the bill May 6, 2015.

GST is a proposed tax on the manufacture, sale and consumption of goods and services across India, and it will replace all indirect taxes currently levied on goods and services by the central and state governments.

Addressing officer trainees of the Indian Revenue Service Saturday, Jaitley reportedly said: “The next session is going to be extremely important. And halfway through the next session, the numbers of the upper house are also going to change. So I am reasonably optimistic, as far as the next session is concerned, that we may be able to push it [GST Bill] through.”

The Bharatiya Janata Party (BJP) government does not have a majority in the upper house of the parliament where the opposition Congress party has not allowed the bill to be passed, asking the government to accommodate its three demands first. Late November, Prime Minister Narendra Modi met Congress party leader Sonia Gandhi and former prime minister Manmohan Singh to discuss the GST bill, among others, but that meeting failed to lead to a compromise.

With only one parliament session remaining in the current financial year, M Venkaiah Naidu, another minister in the BJP government, said Saturday that the government was ready for a special session of parliament to pass the GST bill, the Times of India reported.

Even after the parliament passes the GST bill — a constitutional amendment — the law has to be ratified by at least half of India’s states, and three more legislations need to be passed by the central and state governments for GST to become a reality. Jaitley said during his address that the other three legislations were ready and that the government had built a broad consensus among the states about the bill, reported CNN-IBN.

According to Ernst & Young, “GST will be a game changing reform for Indian economy” because it will make India one big common market and reduce “the cascading effect of tax on the cost of goods and services. It will impact the Tax Structure, Tax Incidence, Tax Computation, Tax Payment, Compliance, Credit Utilization and Reporting leading to a complete overhaul of the current indirect tax system.”

The Economic Times, an Indian business newspaper, referred to a World Bank report last month, and said that delay in implementation of GST might mean that India will miss a growth opportunity. In a similar vein, local news channel NDTV reported last month that Christine Lagarde, managing director of the International Monetary Fund, was also pitching for early implementation of the GST regime.

Around the same time, P. Chidambaram, a former finance minister under the previous Congress-led government, defended his party’s stance on the GST bill.

Meanwhile, Indian software giant Infosys is continuing work on development of the technology platform for GST whose deadline has been moved to June 1, the Economic Times reported.