GST Bill – Can it go through in the monsoon session?

With Finance Minister declaring his government’s intent to push through the GST Bill, the focus returns to GST in the monsoon session. What could be the challenges in pushing the bill through and also what could be challenges in implementation?

It is likely in monsoon session… 

The recent state elections have been a mini-vote for the ruling NDA. While the ruling NDA may not have shown fire-works in Tamil Nadu, they surely had a lot to celebrate. The NDA won Assam by a clear majority and also managed to make serious in-roads into Kerala and West Bengal. That message must not have been missed by any of the opposition parties. With more term completions in the Rajya Sabha the number of votes against the GST have reduced by about 12.

The passage of the Bankruptcy Bill in the Upper House also shows that the GST Bill can be passed with a little bit of reconciliation and flexibility. Also after its below-par performance in the recent assembly elections, the Congress may not be too keen to take an aggressive stance on blocking the GST Bill. More importantly, some of the key supporters of the Congress like the Left Front may not have much credibility in the Upper House after their disastrous performance in the Bengal elections. They may, therefore, choose to maintain a low profile. Additionally, parties like the TMC, AIADMK, SP and BSP will be keen to build bridges with the central government. In all likelihood, the GST may be passed in the Monsoon Session of Parliament.

Implementation is the challenge…

The passage of the GST Bill may not be the real challenge for the ruling NDA. The bigger challenge may be in its implementation. There are 3 broad reasons why implementation could be a challenge. Firstly, even if the GST Bill gets passed in the Monson Session, they have to be ratified by a majority of the states. Also, minor issues like rate of GST, state share of revenues and state privilege for imposing levy have to be ironed out. The earliest the implementation can happen will be April 2017 and that too is quite optimistic. Secondly, there is the issue of company-level readiness for GST. Since GST involves overhauling the entire state taxation system, companies need to incorporate large-scale changes in their invoicing, reporting and taxation software and systems. Lastly, the big challenge for the government could be the inflationary impact of the GST implementation. In most markets the experience has been that GST results in a rise in inflation by 2-3% in the first 2 years of implementation. That will coincide with the next general elections in 2019. Will the government want to take that kind of a risk, will actually determine the fate of GST! ©

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