With the President giving his assent to the GST bill, the government also gave its nod for the formation of the GST council, which will decide the tax rate, exemptions, etc. The GST council will be headed by the Finance Minister and will have representatives from all states and union territories. It is expected to be set up by November this year.
GST will bring India under a single tax regime and is being eagerly awaited by India Inc. especially the e-commerce sector, which has to undergo heavy taxation while moving goods across borders.
Speaking to exchange4media after the President passed the GST bill into law, Rohan Bhargava, Co-founder of CashKaro.com said, “With the President's assent, a big milestone in the eventual enactment of GST has been accomplished. This is also a great step by the government to simplify running a business in India, as some of these rules cause unnecessary frustration and complications for entrepreneurs. However, we have to wait and watch until next year as it is still unclear what the tax rate, cess and surcharges will be. The interstate transfer of goods owing to trade barriers shall ease out under the GST regime; one of the biggest challenges currently faced by the e-commerce companies. Overall, it’s a welcome note as interesting times lie ahead of us.”
Major Prashant Rai, Founder and CEO of OTJ247.com opined that the simplicity of the tax should lead to easier administration and enforcement. It will also open new markets for online players who face complexities of entry tax and other processes while entering specific states, he further added.
“E-commerce players have large number of sellers listed on their platform. These sellers will have cash-flow issues as they will have to claim refunds for tax paid on inputs, which e-tailers will not be able to account for. Thus, this will increase the compliance burden for e-commerce players,” Rai said.
Another positive response came from Vishwavijay Singh, Co-founder of Salebhai.com, who compared the GST to the economic reforms of 1991. “This will further boost the ecommerce ecosystem in India. The ease of doing business in the country will increase with a uniform tax regime minus state-specific rules. While implementation may take some time and there are bound to be challenges, GST will definitely benefit all stakeholders in the long run. President nod on the Constitutional amendment has paved the path for a landmark tax reform,” he said.
However, there are still potential hurdles on the way ahead; the primary of which is the tax rate, which is yet to be decided.
Mahesh Jaising, Partner at BMR & Associates LLP, agrees that a lot will depend on the consensus within GST Council on the issue of GST rates, dual control for assessment/ scrutiny and exemption to be continued in the GST regime. From the legislative perspective, however, he felt that the implementation of GST could be completed by the April 1, 2017 deadline.
“As a next step, the Centre and the States will need to implement these changes through release of IGST, CGST and SGST legislations. Also, in terms of the final date of introduction, one needs to look out whether industry’s request for an introduction after a clear period of 6 to 9 months since finalisation of draft laws would be considered,” he added.
The Internet and Mobile Association of India (IAMAI) has also raised concerns about what it says are certain “loopholes” in the bill. Speaking to exchange4media, an IAMAI spokesperson said, “While we welcome the passage of the Bill, there are some discrepancies, if not addressed will stifle the growth of the industry.”
In particular, IAMAI has raised objection on what it says is a failure by the GST to recognize internet services. In a press statement, IAMAI said there was a “systemic bias”, reflected in the form of disparate compliance burdens imposed on agencies involved in online trading in contrast to offline trading.
According to IAMAI, “Advance collection of taxes will create challenges for cancellation/return policies and thereby disrupt e-commerce services for customers, since the e-tailing business offers options for return/cancellation facility for buyers allowing on average 30 day return period for all such transactions. Incidentally, such liabilities do not apply for the offline counterparts (brick and mortar stores/shopping malls), which makes the GST regulations lopsided.”
IAMAI also says that there some definitional problems (regarding e-commerce) in the bill that can lead to unnecessary confusions.