While the GST will roll out on July 1, businesses in India will get an extended time to file their income tax returns for the first two months of July and August. Certain sectors like the civil aviation were demanding to defer GST implementation.
"We don't have the luxury of time to defer implementation of GST. The council decided categorically that it will be implemented from July 1," finance minister Arun Jaitley told reporters in New Delhi.
Experts agree with Jaitley and welcome the transition.
"GST will usher India into a new superior era of tax collection predictability and compliance. It is coming after a long drawn process, due to consensus building and conforming to India's federal realities, which is part and parcel of our democratic system. A succession of coalition governments at the Centre since the early 1990s too contributed in making it a long drawn process," N. R. Bhanumurthy, Professor, at the New Delhi-based National Institute of Public Finance and Policy, told Sputnik.
Like Canada and Brazil, where a dual-GST scheme is being followed, India has opted for a multi-layer GST structure, due to bargaining between states. Goods and services will be taxed at different slabs. Unlike other countries where GST is generally between 15-20 percent, India's rate varies between 5-28 percent.
The variance is to ensure that initial period of GST implementation must not contribute to inflation, which in India's case, will be aggravated due to supply-chain deficiencies.
"In many countries, GST was introduced at a lower rate than the pre-existing tax rate. Despite that, the GST pushed up inflation for one year in all the five countries in our study (Australia, Canada, Japan, Malaysia and Singapore), after which inflation moderated. In some countries, the pass-through of higher tax costs by firms occurred with a lag, as firms took time to fully assess the cost implications of the new tax structure," a recent report on GST by consultancy firm Nomura said.
Experts said the different slabs proposed by the GST Council should take care of inflation. But they also accept that the initial few months could be confusing for consumers.