The Institute of Chartered Accountants of India (ICAI) has asked the government to defer the implementation of Goods and Services Tax (GST) from April 1, 2010 by an year to allow for a smoother transition to the new indirect tax framework.
For smoother transition, it is imperative that GST be implemented from the first day of a financial year. Since there is very little time for the slated implementation date of April 1, 2010, it is recommended that GST be implemented from April 1, 2011, the ICAI said in its submission to the government.
The Centre and states are yet to finalise the framework for the comprehensive tax reform undertaken by the United Progressive Alliance government that seeks to create a seamless market in the country. The GST will replace the major indirect taxes excise duty, service tax, value added tax and other state taxes with a single levy, will create a national common market at present fragmented because of multiple levies.
Though the rollout of the tax looks unlikely from April 1, 2010, both the Centre and the states are locked in a debate over whether to unveil it in middle of the financial year. The Centre is in favour of a mid-year launch while states want the new tax to be implemented from April 1, 2011 to give enough time to trade to prepare for the new regime.
The ICAI had constituted an expert committee to look into the implementation of the GST structure at the instance of the finance ministry. While favouring a dual- GST structure, the ICAI want the tax to be administered by a common authority.
As part of transition measures, the ICAI has suggested that the indirect tax on on-going works contracts/turnkey contracts and lease transactions be discharged on similar basis as like prior to introduction of GST. This it says will safeguard against an increase in liability for suppliers involved in such contracts from an adverse impact of higher taxation rates under GST.