Indian GST implementation hits new delays

Plans to replace the existing Indian VAT and CENVAT regimes with a new Goods & Services Tax (GST) look likely to be delayed again a negotiations are re-opened.

The government’s plans to introduce a new implementation Bill are being delayed as the States seek to re-open discussions on the rates for petroleum and alcohol.  There had been an agreement allowing GST to be charged on these goods, plus an additional State-levy tax if required.  However, the States are now seeking a re-negotiations, with the States looking to remove both from the GST net.  Aside for increasing compliance with extra taxes, it would distort supply chains and pricing.

India currently operates several consumption taxes, including VAT, CENVAT, Service Tax and others.  They are archaic in design, often overlapping which gives rise to double taxation.  They also slow growth and trade across the nation, in particular across State lines.  It is believed that a new GST regime could add as much as 1% GDP to India’s economy.  You can read more about Indian VAT reform here.

There have been protracted negotiations on the introduction of GST, and it seems unlikely that the consumption tax will be introduced in 2015.