Centre-state consensus raises hope for GST implementation

Though the flexibility to states to become part of the GST in a phased rollout sounds pragmatic, considering the political situation and opposition from some states, it does not augur well for industry. A partial GST rollout as we have seen during VAT days is a nightmare for industry from operations perspective and the very concept of common market. In the event of a phased rollout, a lot of thought is needed on how to handle transactions between the states within GST and those outside. We still hope that better sense prevails among the polity and we have a complete GST roll out. Countries like Canada have implemented such models and have succeeded but in an Indian context it will be onerous to say the least.

CST compensation consensus is important from the states' perspective as this was a major roadblock for the progress of GST. However, considering the precarious fiscal situation, one wonders how the Centre would compensate R34,000 crore in the near term. The removal of dispute settlement from the Constitution Amendment Bill and its move to GST council is another step where the Centre has shown maturity to address the concerns of the states.

With the deadlock broken, as a way forward, three panels comprising of both state and central officials have been given the task of looking into various issues. First on integrated GST for inter-state transactions and tax on imports and place of supply rules — things that are very important for smooth credit flow and taxing jurisdiction. Second, to advice on revenue-neutral rate which is imperative for a perspective on a base GST rate. Third, to examine modalities of control to ensure ease of compliance, with avoidance of multiple authorities important to bring down transactions costs. Another key issue will be to decide thresholds for the central GST, whether they will be aligned to state GST levels or otherwise. The panels are expected to revert within three months further indicating the urgency in the minds of the law makers.

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