GST offers ‘huge implementation challenge’ for Modi govt

While India’s on track to meet its deadline for a much-delayed national sales tax, implementation is seen as a test in the nation that has more states than the EU has members and a population twice that of North America.

The goods and services tax (GST) will replace more than a dozen levies that were fracturing the world’s fastest-growing big economy, unifying India for the first time into a common market with more than 1 billion consumers. Proposed over a decade ago and since then refined to win bipartisan support under Prime Minister Narendra Modi, roll out is scheduled for 1 July.

“It’s a massive tax change, administrative change at the centre and the states, lots of procedures, processes, new forms, so there’s a huge implementation challenge,” Arvind Subramanian, Modi’s chief economic adviser, said Wednesday in a Bloomberg Television interview from Hong Kong. “But I think that’s going to be a temporary thing. Initially there’s going to be bumps on the road.”

Subramanian’s comments come hours before lawmakers are set to debate bills to finalize the structure of the GST. Parliament needs to approve the legislation in the session ending 12 April to meet the government’s deadline, and a select group of ministers are hashing out various other rules behind the scenes, including which goods will be taxed at what rate.

The introduction of the four bills is a “concrete step toward implementation from 1 July,” said Santosh Dalvi, partner, indirect tax, at KPMG in India. However—apart from the classification of goods and services—companies are also seeking clarity on whether existing tax exemptions will continue and need enough time to prepare their technology and compliance structures, he said.