India Inc more comfortable with April 2011 GST rollout: Deloitte study

NEW DELHI

WHILE the proposed Goods and Services Tax (GST) has been widely perceived as beneficial for the economy, the government needs to set to rest the apprehensions surrounding the suitability of the dual structure of the GST model, says a survey released by the consultancy firm Deloitte on Tuesday. The firm surveyed finance executives of leading corporate houses who vouched for the new unified tax, but they questioned the suitability of the dual structure, which seems to be the only practical alternative as of now. The surveyed executives also shared concern about the possibility that a few states may not join the GST bandwagon. The current tax structure in India consists of federal and state levies on goods and services that are administered by the central and state governments, respectively. It has its own drawbacks such as cascading multiple taxes, higher administration cost and complex compliance. While presenting the budget for the year 2009-10, the finance minister had indicated that the dual GST structure will be implemented on April 1, 2010. However, the design of the dual GST is yet to be released in the public domain for discussions. Nevertheless, it has been observed that in a typical dual GST structure, the central and state governments concurrently levy tax on a common base for supply of goods and services. In case the government is not in a position to fully implement GST by April 2010, about half of the correspondents favour central GST being implemented first followed by state GST whereas about onethird respondents favour simultaneous implementation of dual GST in all states. The respondents were divided over extension of GST to products of conspicuous consumption that attract high tax rate, continuation of existing and fresh incentives or the manner in which tax credit will be made available on capital goods. Deolitte points out that to adhere to the April 2010 deadline, the government would need to mobilise its infrastructure in an unprecedented way to undertake internal reorganisation of roles and responsibilities, develop business process and audit manuals, train its resources and most importantly to achieve a degree of IT-enabled environment that the checks and balances in GST require. “The most significant point to note in the survey is the view put forward by many respondents that the appropriate date for GST introduction is April 2011. This clearly shows that there is a perception of lack of preparedness on the part of trade and industry and also the government to handle GST,” said Mr Prashant Deshpande, senior director-Indirect Tax.