GST Council Deadlock – A Blessing in Disguise for SMEs?

GST council today met for the ninth time to settle down the contentious issue of dual control, but the deadlock still remains. It was highly anticipated that conclusion would be drawn this time, however finance minister failed to bring consensus among the states over the issue of revenue sharing and dual control. Delay on agreement between states might force center to go for voting which has been avoided so far and approach of unanimous decision between states has been maintained.

Major implication of today’s meeting are:

• Roll-out of GST from 1st April, 2017 is now virtually  not possible, we may expect a revised date from government shortly.
• Small and Medium Businesses may have a reason to cheer as they get the luxury of time to plan and execute the transition into GST regime.
• GSTN, the company responsible for setting up the IT infrastructure for GST implementation will have more time to test the system and make it more robust.
• Central Government might opt for voting on these issue between states, this may upset certain states like West Bengal and Kerala.
• While all the planning has been done keeping April 1,2017 as the roll-out date, Ministry of Finance may have to work regressively on the draft  budget and Indirect Tax related provisions under the current regime only.

Given the situation that GST is not implemented from April 1, it needs to be implemented anyhow before September 16, 2017. This is because of the amendment in the Constitution of India which empower both Central and State government to collect current indirect taxes only till 1 year from the passage of constitution amendment bill, this date falls on September 16, 2017.

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