MB Subba

The National Assembly yesterday passed the Goods and Services Tax (GST) Bill 2020 unopposed, which according to the National Council was in violation of the Public Finance Act.

The GST Bill unprecedentedly has two different dates of commencement. Chapters 7, 8, 9 and 10, which require software for implementation, will be implemented from July 1, 2021.

The rest of the chapters will become effective as per Section 46B of the Public Finance Act 2012, which states that a money Bill must be applied retrospectively from the day the Bill was presented in the National Assembly.

The National Council, despite its decisions on money Bills being not binding, had recommended that the GST Bill be withdrawn. The House of review had concluded that not only was the government ill prepared, the effective date was also in violation of the Public Finance Act.   

Finance Minister Namgay Tshering acknowledged that the deferring implementation of the Bill appeared in contravention of the Public Finance Act.

But he added the laws needed to be interpreted in a coordinated manner. 

The government, he said, would complete all preparatory work within a year. The National Council also recommended the government to amend the Public Finance Act, which the finance minister said was received positively by the government. 

Prime Minister Dr Lotay Tshering expressed contentment over members’ support for the GST Bill. He said that the effective date needed to be deferred as about a year’s time was required for development of a GST software system.

Drametse Ngatshang MP Ugyen Wangdi also supported the National Council’s recommendation to amend the Public Finance Act to avoid such issues in the future. 

He said that some money Bills must be implemented as per Section 46B of the Act to avoid hoarding. “But some money Bills need not be implemented immediately as prescribed in the current Public Finance Act,” he added. 

The House rejected the National Council’s recommendation to withdraw the Bill through a show of hands. None supported the recommendation. 

The House of review had suggested its withdrawal in the interest of saving the Parliament from willfully violating Section 46B and to provide enough time to the government to prepare for smooth transition to the GST system.

The government hopes to recoup an additional revenue of Nu 3 billion (B) annually through GST. GST is a consumption-based single 7 percent tax system that will subsume the sales tax and modify the excise system.

Just like any other GST regime across the globe, business entities and individuals in the country would be levied GST on all goods and services either manufactured within or imported. Exports, on the other hand, are considered zero-rated supplies, free of tax.

According to the government, GST will have a positive impact on the economy due to reduced tax burden and improved competitiveness. 

Since the GST implementation will be fully supported by an automation system, it will strengthen tax administration, improve taxpayer services, minimise leakages and enhance tax collection. 

However, businesses and entities, whose turnover is less than Nu 5M are not required to register for the GST. 

Although it is voluntary, such businesses cannot avail input credits while GST on imports would be in keeping with the norms.