India Races to Implement Epic Tax Reform

  • ‘Always good to set stiff targets and try meet them’: Jaitley
  • Around 60,000 state and federal tax collecters to be trained

Modi’s government set a target date of April 1, 2017, for a goods-and-services tax known as GST to take effect.

Photographer: Prashanth Vishwanathan/Bloomberg

After Indian lawmakers took a decade to agree on the nation’s biggest tax reform in modern history, Prime Minister Narendra Modi is racing to get it implemented in less than eight months.

“We are going to try to make it reasonably as quick as possible,” Finance Minister Arun Jaitley told reporters in New Delhi on Thursday. “It is always good to set stiff targets and try meet them, rather than have no targets at all.”

Modi’s government set a target date of April 1, 2017, for a goods-and-services tax known as GST to take effect. The announcement came a day after he won unanimous support in parliament’s upper house for a constitutional amendment that will unify India’s 1.3 billion people into a single market for the first time, eliminating a number of taxes that inhibit trade between India’s various states.

Here is the timeline, and challenges that may hold things up:

In The Next Few Months:

  • At least 16 states to ratify the bill in about a month
  • President to give his assent on constitutional amendment
  • Cabinet to approve the formation of GST Council
  • GST Council to recommend model GST laws
  • Cabinet to approve GST laws

By December:

  • Federal and state governments to approve their respective laws
  • Back-end and front-end IT systems to be ready
  • Roughly 60,000 officers to be trained on GST laws

By March 2017:

  • Training to be done on IT systems
  • Outreach program with industry
  • Testing and integration of GST front-end and back-end IT systems
  • New tax set to roll out from April 1, 2017

Possible Roadblocks:

  • Calculating the revenue base of states and the federal government
  • Determining compensation to be paid to states
  • Making rate structure
  • Agreeing on the list of exempted items
  • Forming a consensus on model GST bill
  • Dividing powers between state and federal agencies for administering GST
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