11 April, New Delhi
Former union finance minister P. Chidambaram on Tuesday opined that the Centre’s effort to roll out the Goods and Service Tax (GST) law by July 1 was “impractical and undesirable” and asked the government to push the date to October 1.
“The goal of July 1 is impractical as well as undesirable. Millions of millions micro small and medium enterprises have to adjust to the new regime. Many of them may simply have no in-house talent or in-house skill to comply with the provisions of the GST law and not make mistakes,” Chidambaram said.
Chidambaram also casted doubt on the efficiency of the GST-Network (GSTN), the I-T backbone of the tax regime.
“The GSTN has to prove itself in a trial. A very large sample of returns have to be tried and must be proved,” he said.
“In my view, the wise and correct date would be October 1, allow a trial-run of the GSTN, give enough time to business, service providers as well as sellers of goods to adjust to a new regime so that its ultimately rolled out,” he added.
The senior Congress leader also criticised the Centre for introducing the GST Bill as a money bill, adding that the move denied the Rajya Sabha of “improving” the bills.
“On the GST bills, we had pointed out that the way imperfect bills were legislated and no attempt was made to make them less imperfect,” Chidambaram said.
“The Rajya Sabha could have improved the bills, but that opportunity was lost as the government adamantly turned down the demand that the bills be introduced, debated and passed as non money bills,” he added.
Admitting that the GST will bring efficiency in revenue tax collection and boost GDP, Chidambaram said the immediate effects, post the implementation of the tax bill, would be inflationary.
“The GST will indeed bring efficiency in tax collection. The GST will bring more potential tax payers into the net and will restrict scope for tax evasion, so, in that sense, more revenues will come and boost the GDP,” he said.
“But on the other hand, in immediate future, the GST will be inflationary. Whether it’ll mildly inflationary or highly inflationary depends upon the ultimate rates which the government announces for the goods and services,” he added.
Earlier this month, the Upper House passed four GST Bills without amendments setting the stage for the government for the launch on July 1, the country’s biggest tax reform since Independence.
Just before the bills were voted on after an eight-hour debate in the upper house, former prime minister Dr Manmohan Singh intervened and asked his party not to seek changes in them to ‘maintain consensus and federal agreement.’
Replying to the debate, Union Finance Minister Arun Jaitley said the GST would not lead to inflation.
He said once the new tax regime was implemented, the harassment that businesses face having to deal with multiple authorities would end and India would have one rate for one commodity throughout the country.
The four bills passed on April 6 – the Central GST bill, the Integrated GST bill, the Union Territories GST bill and the compensation law – have already been cleared by the Lok Sabha, where the government has a big majority.
Now, a state GST Bill will be presented in the state assemblies for their approval.
The GST rates will be discussed by the powerful GST Council on May 18-19.