India faces April 2016 GST delay

Tue 30th Jun 2015

Plans to introduce a long awaited reform of Indian VAT, replacing it with Goods Sales Tax, on 1 April 2016 look increasingly uncertain.

Congress party blocks GST and 1% Interstate Levy

The opposition Congress party is gaining momentum in its efforts to have the GST implementation watered down. GST reform is being championed by the BJP government of Prime Minister Modi. Congress is seeking to impose some of the same delaying tactics used by the BJP when it was in opposition.

Congress is looking for a guarantee of a GST rate of 18%. It is insisting that the BJP reintroduces the proposed independent disputes authority and provides clearer guidelines on the compensation mechanism for losses on the new alcohol GST.   It also wants the scraping of the 1% GST Interstate Levy introduced to placate the big manufacturing states seeking compensation from the withdrawal of the current VAT regime.

Industry concerns on GST compromises

Many business leaders are now openly criticising the 1% compromise Interstate Levy on cross-border supply chain manufacturers as threatening to make local production uncompetitive compared to imports.  The GST Bill has also left out real estate, which will leave a double taxation problem of up to 40% on factory build projects.

Indian GST to boost growth

The plan to replace Indian VAT, CENVAT, Service Tax and other consumption taxes in India has been discussed for over 10 years. It is hoped that it can boost GDP by up to 2% due to the severe double taxation that deters cross state trade.  An Indian Goods & Services Tax would replace 14 existing Centre and State taxes.

 



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