Arun Jaitley

Noting the challenges which businesses could face following the launch of the Goods and Services Tax (GST) scheme on July 1, Finance Minister Arun Jaitley said on Tuesday that small business had been given enough time to prepare for the rollout.

Reuters reported on Tuesday that Jaitley ruled out any further slippage in the timeline. Addressing a news conference, he said there would be initial challenges after launching the tax, which would require all but the smallest businesses to file three detailed returns online every month.

But, with 6.5 million firms already registered for GST and more expected to sign up, there was no excuse for firms not to be ready for what has been billed as the biggest tax reform in India's 70-year history, Reuters reported.

"We have been saying for the last six months it would be July 1 - nobody has any business not to be ready," Jaitley told reporters. "If he's still not ready, then I'm afraid he does not want to be ready."

GST will kick in from July 1, ending more than 11 years of hectic confabulations among the Centre and the states, shepherded by several Union and state finance ministers, and withstanding testy relations often marked by political brinkmanship, said on Tuesday.

It is expected to bring down barriers between more than 30 states and territories, unifying India's $2-trillion economy and 1.3 billion people into a single market. The government says it will boost both commerce and state revenues.

A midnight event in Parliament's central hall on June 30 will roll out the Goods and Services Tax (GST), with the government announcing a grand launch to mark the occasion billed as India's biggest ever reforms initiative.

The earlier rules required taxpayers to file returns by the 10th and the 15th of every month. On Sunday, the GST Council eased rules for July and August to ease taxpayer anxieties. Under the new system, taxpayers will have to make a self-declaration under a new form for the month of July by August 20 and for August by September 30. This will give them extra time of about a month to file returns without worrying about penalties and fines.

Any company generating a large number of invoices will need to adopt special software packages that enable them to format and reconcile invoices, then upload them to the GST Network, an IT system that will process up to 5 billion invoices a month.

If companies struggle to comply, that could block the flow of input tax credits that are a new feature of the tax, experts and business groups say. This would force firms to pay tax on the full cost of an item rather than just value added, tying up working capital and cutting into profits.

Reuters quoted Jaitley as saying that he expected there to be "some challenges" in the short term after the launch, but he dismissed concerns that registering for and complying with the GST would be too hard.

"Industry and trade have to prepare themselves. It's not a complicated process," he said.

Jaitley said he anticipated, over the medium and the long term, that improved tax collection under the GST would cause revenues to grow, and the spending capacity of India's federal and regional governments would increase.

"Consequently, it should have a positive impact on the GDP," said Jaitley. "The size of the formal economy should also increase."