On March 16, India’s influential Goods and Services Tax (GST) Council approved the draft State GST (SGST) and Union Territory GST (UTGST) bills, completing its approval of all five bills related to the proposed new indirect tax system. While additional approvals of the legislative package are needed, this massive overhaul of the country’s taxation system remains on track to take effect July 1.
The proposed GST is a destination/consumption-based indirect tax that would replace one of the world’s most complicated indirect tax systems – a system that adheres to an origin-based indirect tax fraught with legal and procedural complications. As we previously noted, the dually-controlled GST system would impose levies on a taxation base shared between India’s Centre (i.e., the federal level) and States. While the GST regime is expected to be much more straightforward than the current system, the new information technology network will require tax functions to modify their systems and strategies, posing challenges to smaller businesses in particular.
Next in the approval process, four bills (CGST, IGST, UTGST, and the Compensation Law) will go to the Cabinet for clearance, before proceeding to Parliament for approval during the current session. (The SGST bill will be introduced to State legislatures for approval at the same time Parliament considers the bill.)
We’ll continue to keep you posted as we monitor this matter.
Please remember that the Tax Matters provides information for educational purposes, not specific tax or legal advice. Always consult a qualified tax or legal advisor before taking any action based on this information.