The Goods and Services Tax will now roll out in July instead of April, Arun Jaitley said.
India's most important tax reform in decades will roll out in July and not April 1 as planned because of unresolved disputes between the centre and states over taxation powers, Finance Minister Arun Jaitley said today.
The
National Goods and Services Tax or GST replaces a jumble of complicated levies and creates a unified market. The GST Council, a decision-making body that combines Finance Minister Arun Jaitley with his counterparts from other states, met today and agreed that the April 1 deadline has been rendered unfeasible.
A major point of dispute has been who will assess -and therefore tax - businesses and entities with annual earnings of upto 1.5 crores. 90 per cent of this category will be handled by the states, and the rest by the centre, said Mr Jaitley today. Those with a turnover of more than 1.5 crores will be divided equally between the centre and states. States like West Bengal have been arguing that ahead of the loss in earnings that they will contend with when GST kicks in, removing the tariffs they charge when goods move across state borders, the recent demonetisation drive by the centre has already hurt their revenues, and therefore the centre must increase what it pays them as compensation over the next five years.
Late last year, the GST Council decided that the new sales tax will apply in four slabs. The tax rates will range from 5 to 28 per cent, with 12 per cent and 18 per cent as standard rates.
The new tax also includes a separate central "cess" that will be levied on tobacco products, luxury cars and aerated drinks, charged on top of the 28 per cent tax bracket.
The central "cess" will remain in place initially for five years and its proceeds would be used to compensate states for revenue losses following the GST's implementation.
It's not clear yet which tax rate will apply to the services which contribute nearly 60 per cent of India's $2.08 trillion economy.
The GST, a reform championed by PM Modi, could add upto two percentage points to India's growth.