The goods and services tax (GST) will be rolled out from June 30 midnight, finance minister Arun Jaitley said on Sunday, adding India did not have the “luxury of time” for more delays in implementing the biggest tax reforms since Independence.
Jaitley, however, added that companies will be allowed to file late returns for the first two months so that they can adapt to a new online filing system.
The GST will require firms to file three online returns each month. Some business lobby groups have urged a delay to the roll out to allow more time to get ready.
“A number of companies and trades have been raising the issue of the lack of their own preparedness. We do not have the luxury of time to defer implementation of GST,” Jaitley told reporters after the penultimate meeting of the GST Council.
The GST will unify Asia’s third largest economy into a common market, eliminating a string of central and state levies.
The Narendra Modi government is keen to ensure a seamless transition to GST, which is expected to shore up state and federal tax revenues, cool inflation and accelerate economic growth by 1-2 percentage points in the medium term.
At Sunday’s meeting, officials also agreed on several sets of GST rules, including anti-profiteering guidelines intended to prevent traders exploiting the reform to ramp up prices.
The GST Council will meet again on June 30, the eve of the launch, Jaitley said.
The council fixed the tax under for hotel rooms costing between Rs 2,500 to Rs 7,500 at 18%.
The cost of eating out at restaurants was also fixed at 18%, down from the 28% decided earlier, which the hotel industry had opposed fearing revenue loss.
The council fixed the tax of state-run lotteries at 12% and of state authorised lotteries at 28%.
The tax rates of all goods and services have now been finalised with a majority of them placed under four broad tax slabs – 5%, 12%, 18% and 28%. However, there are items which have been exempted from the tax structure.
“The deferment of the detailed GST returns for the month of July and August would bring some relief to the industry. It will give the industry the much needed time to align their IT systems and integrate with the GSTN,” Abhishek Jain, tax partner at EY India said.
Praveen Khandelwal, the secretary general of the Confederation of All India Traders too described the move as “hugely beneficial for traders as they will now have more time to understand and acquaint themselves with the new tax structure.”
Once fully up and running, the GST would require companies to file a complete return of their sales invoices by the 10th of the following month, with a second of their purchase invoices by the 15th. A third return would calculate their tax bill.