GST roll-out delay won’t impact India’s bid for better Doing Business ranking

Because the GST reforms—whether implemented in April or September—will be considered only in the next year’s Doing Business report

New Delhi:  An impending delay in implementing the Goods and Services Tax (GST) reform from its earlier deadline of 1 April is unlikely to impact India’s hope for a better World Bank Doing Business ranking.

This is because while for most indicators, the deadline for implementing reforms is 31 May, for tax reforms, the deadline is 31 December, or seven months prior to the deadline for other reforms.   

This would mean that the GST reforms, whether implemented in April or September, will be considered only in the Doing Business report, which will be released next year.

“It does not matter if the GST is delayed from April to September as we have time till end of December to implement it to get the benefit next year in the World Bank ranking,” a DIPP official said on condition of anonymity.

Doing Business records the taxes and mandatory contributions that a medium-size company must pay in a given year as well as the administrative burden of paying taxes and contributions and complying with post-filing procedures.

The World Bank included the “post-filing index” criteria for the first time last year under the “paying taxes” parameter. It measures what happens after a firm pays taxes, such as tax refunds, tax audits and administrative tax appeals.

India scored abysmally low on “post-filing index” criteria, scoring 4.27 out of a maximum score of 100. This has kept India’s “paying taxes” ranking unchanged at 172 among 190 countries, limiting its overall improvement in ranking to just one rank to 130 in this year’s ranking.

After the GST is implemented, the “post-filing index” for India is expected to significantly improve as instead of paying 14 indirect taxes, businesses will pay only a single tax with minimal scrutiny and quicker refunds.

Final Draft of GST Laws Ready; Council to Meet on Feb 18

Finance Minister Arun Jaitley on Friday said that final drafts of the goods and service tax (GST) laws are ready. He further added that the GST council meet on 18 February.

“My target is to put GST drafts in Budget session of Parliament,” he said.

He further added that the government is making efforts to make the society more tax compliant. He said that the lower tax rate in Budget 2017 is so that more and more people are to be incentivised to pay taxes.  

““If you leave 56 lakh salaried taxpayers, then only 20 lakh people declare their income and pay taxes voluntarily. Even for a non tax compliant society, State needs resources, and of course, resources would come from the affluent,” he said.”

Addressing a post-budget interactive session with industry associations at Vigyan Bhawan he said while the country has so many doctors, lawyers, consultants, business persons, many choose not pay taxes. Hence, they are looking to make the country into a more tax compliant nation as there is a need for resource for the State.

He further spoke about the decision to reduce the cash donations for political funding he said, “In past we tried to cleanse political funding by giving tax exemptions to both donor and political party if payment by cheque. But it has not worked.

“Our taxation approach is absolutely clear. Cap of Rs 3 lakh for cash transaction is to curb black money. We are hopeful that GST will make generation of black money itself difficult,” he said.

Jaitley further said that it is time to abolish Foreign Investment Promotion Board (FIPB). “We intend listing several public sector units (PSUs) to make their functioning more transparent. We have much higher target for disinvestment as insurance sector companies are also included,” he said.

“Our priorities are very clear- Agriculture, rural India, infrastructure, social sector. We are constrained by fiscal prudence, but we have not cut expenditure to maintain fiscal deficit,” he said