Legislative bills related to India’s historic sales tax overhaul received approval from the country’s Lower House of Parliament in late March. On April 6, 2017, the Upper House of the Indian Parliament also accorded its approval to the draft bills, without recommending any changes or amendments.
At the moment, this massive overhaul of the country’s taxation system appears likely to clear its remaining hurdles. This relatively smooth progress (so far) should not obscure the implementation and compliance challenges that await companies conducting business in India. Some of these challenges will be significant. Indian Prime Minister Narendra Modi’s chief economic advisor recently told Bloomberg Television that the new goods and services tax, referred to as GST, qualifies as a “massive tax change” that will require “administrative change at the center and the states, lots of procedures, processes, new forms,” and more.
The bills related to the tax overhaul will next be submitted for President Pranab Mukherjee’s consideration. (India’s parliamentary government includes a President and a Prime Minister.) President Mukherjee’s approval would make the bills into law. The overhaul also requires the approval of separate, related legislation by India’s state and territory legislatures, which appears likely to occur. While the July 1 roll out remains possible, some India tax experts have advocated extending the implementation date to September 1.
One of the many challenges companies will confront involves the publication of the final tax rate schedules for products and services. The GST Council is meeting on May 18-19 to finalize the rates of GST for the products and services. According to a press release from the Revenue Secretary, Government of India, they are likely to be made public during June, closer to the GST launch date. This is designed to prevent companies from taking undue advantage of the information, for example, reduced/excessive production during the next couple of months, lobbying in relation to tax rates, and embellishing accounting statements to lower tax burdens before the new indirect tax regime takes effect, etc. In fact, the Revenue Secretary is quoted as having mentioned that it would be sufficient if the tax rates are released on the last day (June 30, 2017). This delay gives companies exceedingly little time to update their tax rules, processes and supporting technology.
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.