GST in India... the bad news

GST in India: Many unaware of complexities of new tax regime

The Indian government is racing to get the goods and services tax (GST) implemented by next April, but experts believe that implementation poses a major challenge as many businesses are still unaware of the complexities of the new tax regime.

Finance Minister Arun Jaitley, who chairs the GST Council, said after its first meeting last Thursday that a timetable had been set for an April 1, 2017 rollout.

"The government is racing ahead but industry is not going at the same speed. Many businesses have no idea of what is coming. They will have to change their software, file returns every month instead of two annual returns," said Mr Kamal Aggarwal, a partner at Sarc Associates, a professional services firm. He has been holding daily sessions on the basics of the new taxation for corporates, lawyers and others.

He noted that millions of accountants would have to be trained and that each accountant would need at least 20 hours of training to get a basic grasp of the GST, one of many challenges before the government.

"I am very happy that this has come in because it plugs major loopholes that existed in this country," he said. "But there are many challenges. It is an automated system. We don't have electricity across the country, we don't have very good broadband connectivity."

He reckoned it would be "complete chaos" for one to two years.

"But in the long term, it will be good for the country," he said.

The federal government is training 60,000 state and federal level officials for the rollout and is working to get the software up and running.

Still, even Infosys chief executive Vishal Sikka has been quoted in the Indian media as saying the setting up of the GST network - which his company is doing - was "a hell of a challenge". He acknowledged there are pockets of weak preparedness.

While the government has expressed optimism that everything would be in place for the rollout next year, experts said it would be the small and medium-sized enterprises spread across the country that would face the greatest difficulty in adjusting to the new system.

In Agra, Mr Manesh Agarwal, managing director of B.B. Foods, which produces and supplies frozen food items like french fries, admits he remains unsure of GST and its impact.

"Everything has two sides. It is being called a game changer, but I don't yet know what the other side to this GST is, and how this will affect my business," he said.

Nirmala Ganapathy

A version of this article appeared in the print edition of The Straits Times on September 26, 2016, with the headline 'Many unaware of complexities of new tax regime'. Print Edition | Subscribe