India has achieved a significant milestone with the passing of the Constitutional (122nd Amendment) Bill, 2014 for GST (GST Bill) on 3 August 2016. The GST Bill seeks to empower the Centre and States to concurrently levy tax on supply of goods and services.

The GST Bill had been passed by the Lower House in May 2015 and was stalled at the Upper House due to lack of political consensus. The Government worked relentlessly towards bringing consensus across the political spectrum. After deletion of the 1% additional tax on all inter-state supply of goods that was proposed in the original GST Bill passed by the Lower House, the Upper House approved the GST Bill unanimously. Other significant amendments relate to compensation to States and the dispute resolution machinery.

GST will create one single unified market by subsuming most of the indirect taxes, currently levied by both Centre and State, which resulted in a fragmented Indian economy. It will facilitate seamless transfer of goods and services across the supply chain in one of the largest markets in the world, comprising one-sixth of the world’s population.

The Government has already released the ‘Model GST Law’, which contains comprehensive provisions with respect to the Central / State Goods and Services Tax (CGST / SGST) and the Integrated Goods and Services Tax (IGST), for public comments in June 2016. The Model GST Law is expected to evolve in several areas in the coming months’ after consensus amongst various stakeholders.

GST implementation in India: Next Steps

  1. Approval of the amended GST Bill by the Lower House
  2. Ratification of the GST Bill by minimum 50% state legislatures before Presidential assent
  3. Setting up of GST council, inter-alia, for framing the CGST / SGST law along with IGST law on inter-state supplies and prescribing the GST rates
  4. Passage of GST law by Parliament and State legislatures by year end (2016)

With the aim to achieve the expected GST roll out date of 1 April 2017, the Government of India will now strive to expedite the finalisation of GST law along with its procedural and administrative aspects. The much awaited step in the right direction has been taken with the passing of GST Bill, which will pave way for the implementation of this all important legislation.