TIOL - COB( WEB) - 518
SEPTEMBER 15, 2016

By Shailendra Kumar, Editor

EVEN as fiscal economists, government watchers, analysts and political pundits continued to find themselves lost in the labyrinth of constitutional and federal realpolitik and, thereby hoped that the birth of GST Council would take more time, the rapid-fire approach of the Revenue Secretary, Dr Hashmukh Adhia, has taken the entire world by a huge surprise. First, he lost no time in making his GST workforce finalise and notify the constitutional provisions relating to constitution of the Council last Saturday evening. Secondly, he held a series of meetings on the same day and moved the Cabinet Note for approval of the proposal for setting up the Council. And the fact that the Union Cabinet took up the issue early on Monday, it shows how closely Dr Adhia is in sync with the wishes of his political masters. He deserved full 'input credit' when he spoke at a hurriedly-convened press meet in the North Block same afternoon and said that he was running ahead of the time schedule he had earlier shared with the media. Kudos Dr Adhia for setting a high benchmark of efficiency and a good precedent for his successors. He has demonstrated that if the policy makers are able to read the mind of their political masters well and in harmony, the efficiency of the much-maligned bureaucracy can be enhanced to such a level that critics can be silenced for quite some time.

Going by the Cabinet Approval, the GST Council is going to be notified by the President of India any day this week or early next week. And the first meeting is going to take place towards the end of next week. Although a permanent abode for the Council's Secretariat is yet to be finalised but Dr Adhia is about to finalise a few names for the Additional Secretary and Joint Secretary-level posts. At least two of the Joint Secretaries are going to be the CBEC Commissioners on deputation to the Council. It is most likely that the TRU is not going to be disturbed as it is not only doing the technical research to be provided to the Council Members but would soon be getting busy with the Union Budget preparations. The fact that Budget 2017 is going to be advanced in the last week of January and the Rail Budget is going to be a part of it, shifting a Joint Secretary from TRU may not be desirable at this stage. In this background, there are going to be barely a couple of officers who understand GST and are capable of living up to the expectations of the Secretary of the Council - the Revenue Secretary holds the ex-officio charge of this post in the Council.

As regards the posts of Secretary and Additional Secretary, some low-decibel fulminations were heard from the IRS Association demanding that these posts should have gone to a CBEC Member and a Chief Commissioner-rank officer of the CBEC. The origin of such demands can be traced to utterly wrong reading of the empirically functional integration of the IAS with the political class not only at the Centre but also the federating States. Therefore, it is naive to ignore the extant reality and demand the post of Secretary to the Council for the IRS. In true harmony with the doctrine of pooled sovereignty, the post of Additional Secretary should ideally go to the States. Or, since it is open to Addl Secretary-rank officials, some of the CBEC Chief Commissioners if they are empanelled under the Central Staffing Scheme, can also apply for the same. Therefore, criticising Dr Adhia on this count is not fair at all. In fact, Dr Adhia should be felicitated by the IRS Association for making their Chairman as Permanent Member (non-voting) of the Council's proceedings. The principle of voting and non-voting Member only means that whenever the Union Finance Minister or even the Minister of State is not there, the Union Finance Minister may authorise the senior most Executive officer i.e Revenue Secretary, to vote on his behalf.

Let me now take TIOL Netizens to Dr Adhia's Presentation made immediately after the GST Bill was passed by the Rajya Sabha on August 3, 2016. A quick glance at the Presentation reveals that under the Heading 'Establishment of Legal Framework', he had mentioned as many as EIGHT items which are as follows:

The next four items are - Recommendation of Model GST laws by GST Council; Cabinet Approval for the CGST and IGST laws by Centre and for SGST laws by all states; the passage of CGST and IGST laws in the Centre and passage of SGST laws in ALL states: Winter Session 2016, and Notification of GST Rules.

Going by his discipline to stick to the blue-print of roadmap he has shared with the nation, it can safely be presumed that the next big thing which is going to come out of his 'pitara' is the polished or retailored Model GST Laws which are to be discussed, debated and vetted by the Council Members. I am sure the industry would have loved to see and give their feedback to the polished version of the Model Laws before they could be taken up by the Council but given the exasperating pace and the time schedule Dr Adhia has been chasing, he is left with no time to share the Second Draft of the Model Laws with the industry and trade. No doubt, going by the matrix of multiple sub-committees which are burning midnight oil to wrap up chapters one after another, there is very little time to do a quality job. This means the general consensus in the corridors of power is to go ahead with flawed laws and then polish them after they are field-tested for their nuisance value.

Interestingly, Dr Adhia has included only those items in his agenda which are practically under his control. Some of the critical issues which one would like to see them quickly debated and settled, are the Exemption threshold; lists of exempted items; composition scheme; dual or 'duel' administration; RNR and the GST rates. But, since all these issues involve shades of competitive sovereignty of stakeholders, Dr Adhia has rightly focussed on the 'critical plumbing' works. And I believe him when he says that he is going to get the Model Laws approved by the Council; followed by the Cabinet approval of the CGST and IGST and for SGST by all the States and then passage of the Bills during the Winter Session, which is also going to be advanced by a couple of weeks. Only after all these key milestones are achieved, the Draft Rules may be shared, if time permits or one may see them only after they are notified. This sounds a little unfair as the Rules are the most critical and definitive window to see the intent and the spirit of the law makers and how they are going to be enforced. More than the Act, the Rules are more widely awaited by the assessees as well as the facilitators. Let's hope the Secretary to the Council takes a more considerate view and shares the Draft Rules with the industry and trade.

Let's now go to the next major HEADING of his Presentation - "Preparation of IT Infrastructure". He says that the CBEC’s Backend systems would be ready by end of November along with 14 States. Backend of even Pr CCA, Banks, RBI and State accounting bodies would also be ready by November-end. Development of GST Frontend and Backend for 17 States by GST would be ready by December-end. And, finally, the testing and integration of GST Frontend and backend for all stakeholders would be done between January to March, 2017.

This is where the actual catch lies for the inevitable delays. Since the GST Network is the sine qua non for smooth implementation of the GST from April 1, 2017, the chain of deadlines set by the Revenue Secretary and imposed on the GSTN and its vendor Infosys is a little unrealistic. Since the vendor has no experience in developing anything of such a humongous magnitude, and what it also calls for is a good understanding of the new tax regime which is yet to see key 'bricks' of its promised premises being finalised, writing a pragmatic and comprehensive code is impossible. Unless the Rules are debated and finalised, providing frontend window is not practical. Since the testing is going to be in the last quarter of the fiscal, it may require a couple of months to improve on the vulnerable spokes before taxpayers are invited to interact with the GSTN.

The poor preparedness of the GSTN makes it clear that even if the Revenue Secretary manages to put any sort of technical work before the Council to take a call, unless the GST Network, a robust one, is ready, nothing would move in the new regime. So, a realistic time-frame can be only October, 2017. And this would also give adequate time to the industry and trade to develop and put in place their own accounting and ERP software. The good of the new tax regime essentially lies in the much-needed delay in its implementation rather than meeting the April 1 deadline. Let's hope what is good for all the stakeholders finally happens in reality!