14:43 GMT +320 June 2018
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    Traders shout slogans during a day-long strike against Goods and Services Tax (GST), set to be launched from July 1, in Ahmedabad, India, June 15, 2017

    Countdown for July 1 Roll-out Of Landmark Indian Tax Regime Begins

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    India is preparing to roll out a landmark tax scheme from July 1. The Goods and Services Tax, commonly known as the GST, will subsume more than a dozen levies into four slabs for an interim period, moving toward the ‘one nation, one tax’ program.

    New Delhi (Sputnik) — Experts said the GST is a step forward and ensures greater predictability in tax collection and compliance in India, something required for a long time. There is a concern, however, that the apparatus, infrastructure and manpower trained to carry out the implementation of the GST is lagging behind and could initially add to the confusion, even chaos.

    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.

    The formal transition to the indirect tax scheme, billed as the biggest reform of its kind in independent India, is likely to take place in Parliament at midnight on June 30. GST is not a new concept to the world, with as many as 160 countries (2016 figures) already implementing a unified taxation system. In fact, France introduced what could be called the first model of GST in 1954.
    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.


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