India’s GST Almost set for 1 July Implementation

March 2017

Businesses have less than two months to complete their preparation for India’s GST regime after the GST Council passed a major landmark in its latest meeting.

The GST Council approved the draft union territory GST (UTGST) and state GST (SGST) laws on 16 March, paving the way for GST implementation in July. All five draft bills have now been approved. The final Central GST (CGST) and Integrated GST Bills (IGST) and the Compensation Law were approved at an earlier session of the GST Council.

The five draft laws will now be submitted to the Cabinet and then onto the relevant state or central parliaments for passage.

"Four of these laws – CGST, IGST, UTGST, and Compensation Law – will be required to be passed by the Central Parliament," finance minister and chair of the GST Council Arun Jaitley told reporters after the meeting. "We will try and do this expeditiously."

"With the approval of SGST and UTGST bill by the GST Council, the decks are cleared for introduction of the GST in parliament and assemblies. This is a resounding reiteration from the government about their seriousness to introduce GST by 1 July 2017," said Sachin Menon, KPMG partner and head of indirect tax. "Clearance of the Model GST Law is a warning bell for those who have not yet commenced their preparations for introduction of GST. It will be too short a time for the industry for preparation if the states are not passing GST law latest by the second half of April."

Rates structure and cess caps

Earlier, the GST Council agreed on a four-tier structure for GST of 5%, 12%, 18%, and 28%, as well as some items at 0%.

Building on that, the Council has now approved the ceiling rates for the cess (tax) to be levied on top of the maximum GST rate of 28% on 'demerit goods’ such as some luxury goods, tobacco and sugar-sweetened beverages.

The cess, which is to be levied on four or five commodities, will be capped at 15% on luxury cars and aerated drinks that fall in this category.

Migrating to GST

The government has also confirmed that it plans to migrate 8.5m central and state taxpayers to the GST system by 31 March.

So far, more than 5.1m taxpayers have migrated to the new system.

According to the plans, agricultural and business entities with an annual turnover of up to INR 2m (US$30,000) will be exempt from registering under the GST regime.

Regulations outstanding

Although the main laws have now gained agreement in the GST Council, some regulations still need to be approved.

Nine sets of rules and regulations require approval, of which five have already been agreed, namely laws relating to registration, payments, refunds, invoices, and returns. Four laws, relating to composition, valuation, ITC and transitions, now require formal approval.

Jaitley said these final rules would be approved at the GST Council’s next meeting on 31 March.

However, after these are approved, one major action will be required to categorise certain commodities into the GST rates structure, Jaitley said. After 31 March, officers will begin the process of fitting various commodities into the defined tax slabs and once this is completed, these would be approved by the GST Council ministers in their next meeting, the finance minister said.

"Once that is done, we will be ready for GST implementation," Jaitley said.

The above article was first published on on 17 March 2017 and has been republished with the approval of the Publisher.