Govt is confident to roll out GST from April 1, 2017 : Hasmukh Adhia

The government is confident of rolling out the GST regime from April 1 next year but the deadline may be difficult to meet if resolution of issues like the rate of tax and items to be exempted take longer, Revenue Secretary Hasmukh Adhia said on Sunday.

The GST Council, comprising of Union Finance Minister and representative of all 29 states, will decide on the central and state taxes that are to be subsumed in the national sales tax (GST) as well as the cesses, he told PTI in an interview.

Adhia said the GST Council shall make recommendation to the Centre and states on the cesses and surcharges levied by the Union, states and local bodies which may be subsumed in the Goods and Services Tax (GST).

"Which all cesses will merge will depend upon the decision of the GST Council. If all cesses are merged in the GST, the requirements of revenue for Union Government would have to be assessed higher, because the income coming to Union from GST instead of cess will now have to be devolved at the rate of 42% to the states," he said.

While the taxes to be subsumed under GST are to be decided by the Council, he said the taxes which will not have separate identity include excise duty, value added tax (VAT), service tax, additional excise duty, CVD, special additional duty of customs, entertainment tax, luxury tax, octroi, entry tax, purchase tax, taxes on lottery, betting and gambling, among others.

"As of now we are optimistic of achieving the target of April 1, 2017. We have already made a plan for training of 60,000 officials, which has already started. 5,000 officers are already trained. The IT backbone will be ready for testing by January, 2017," he said.

Meanwhile, Adhia tweeted on August 3 as saying:

4/4 We are ready with state of art IT design for GST implementation. Hardware and software will all be ready for testing by jan 17.

— Dr Hasmukh Adhia (@adhia03) August 3, 2016

Stating that the government will do its best to achieve the target date of rollout, Adhia said the only concern remains resolution of issues by the GST Council.

"If the resolution of various issues in the GST Council takes more time than expected, then there would be difficulty in achieving the target," he said.

In case the deadline is missed, it is theoretically possible to roll out GST from the middle of the year but the trade and industry will need to be consulted as some of the big companies have to change their software to accommodate the new taxation regime, he added.

On the GST rate being talked about in the range of 18-20%, he said, "The rate and rate structure can only be based on facts and figures on the existing revenue of states and Centre which are to be discussed in the GST Council.

"At the moment it is not possible to say yes or no to any such artificial number. The decision on rates will also depend on list of exempt items, list of demerit commodities, among others."

The GST, he said, will bring down burden of taxes on the common man. "However, unless the rate structure is finalised, it is not possible to predict which items will get relief," he said.

On worries of a spike in service tax rate from current 15%, Adhia said it is important to take care of services sector at the time of finalising the rate structure.

"We cannot suddenly spike the tax on the services sector. The facility of giving input tax credit on goods against services will also give relief to the services sector. We will have to fit services in the slab which is neither too high or low at the time of deciding the final rate structure," he said.

The official said GST is unlikely to cause loss to the gross domestic product (GDP).

"However, if projections of GST do not go through then it may have an impact on the fiscal deficit to that extent. Also, the requirement of compensation to be given will have to be included while calculating share of central government in GST," he said.

Asked about the government's fiscal deficit being impacted because of compensation it has to pay to states for any loss of revenue due to GST, he said the arithmetic has to be done correctly so that the Centre does not end up having a huge fiscal deficit.

"Of course, it is the responsibility of the central government to devolve all taxes including GST under the Constitution. So it is not a worry," he added.

Asked about exemptions to be given under GST, he said exemptions are supposed to be eliminated under the GST regime.

"Most of the exemptions which are already given will have to be converted into direct subsidy through the budgetary route of Central and state governments, if they have to be continued," he said.