Fiscal policy expert Parthasarathi Shome has said that the success of the goods and services tax (GST) hinges on the preparedness of businesses to comply with the new levy.

He reckons that the Centre and states will be forced to make improvements in the GST design if taxpayers find it difficult to comply with the new regime.

“I do not want to be unduly critical of GST. The Centre and states have done well to forge a consensus on the enabling laws after intense negotiations. Some give and take is inevitable.

“Hopefully, improvements will take place if taxpayers are discomforted,” said Shome, former advisor to the finance minister during the United Progressive Alliance regime, at a panel discussion followed by the launch of his book ‘Development and Taxation’.

GST is meant to create a seamless common market and the Centre is hopeful of rolling out the new levy on July 1.

The optimism follows the GST Council’s nod to all the enabling laws on March 16 -- the draft central GST, integrated GST, state GST and the Union Territory GST laws. Besides the Centre, state legislatures too have to approve the law, after which all the rules have to be finalised and published.

India's plan is to have a dual GST with a four-rate structure ranging from 5% to 28%.

But the levy excludes real estate, electricity and alcohol besides petroleum products (that will be brought under the net subsequently). An extra cess will be levied on luxury and non-merit goods.

Shome is, however, clear that the current version of GST is not internationally benchmarked. “It seems as complex as the value-added tax regime that was introduced in Brazil in the 1960s,” he said, adding that improvements can be made over time. Shome was involved in the exercise to improve the VAT regime in Brazil in the 1990s.

GST will be administered both by the Central and state tax authorities. So Shome underscores the need for proper training of the tax administration to ensure ease of doing business.

Ahead of the value-added tax regime that replaced archaic sales tax imposed by states, the empowered committee of finance ministers held several rounds of discussions with various stakeholders that included industry and trade, Shome said.

Are both taxpayers and the tax administration prepared to implement the new levy and is the IT system up and running? These are the crucial questions to be asked, he said. A robust implementation strategy is also important to ensure the success of the tax reform, he added.