States to meet today on GST amid demand for delay

16 Dec 2009, 0319 hrs IST, PTI

NEW DELHI: States will meet here on Wednesday to discuss the fine contours of the Goods and Services Tax as the scheduled date for its introduction  draws closer.

The new tax regime that will do away with most of the indirect tax levies like excise and service tax at the Centre and Octroi and VAT at the state level is slated to be introduced on April 1, 2010.

However, there are apprehensions that its introduction could be delayed. States such as Madhya Pradesh, Tamil Nadu, Gujarat and Rajasthan are demanding that the introduction of GST be postponed as there is no consensus on the rates.

The Empowered Committee of state finance ministers meet comes in the backdrop of release of a discussion paper on GST released on November 10. It proposes replacing central levies like excise duty, service tax, special additional duty, countervailing duty with GST.

State levies like VAT, sales tax, entry tax would be subsumed under the GST. And, central and state cesses and surcharges would be out once the new regime comes into effect.

The empowered committee chairman Asim Dasgupta has said the GST would have four slabs and these are likely to be unveiled within 15 days.

"It (GST) will have four slabs. I hope the rates will be released in the next 15 days," Dasgupta said.

Dasgupta said GST slabs would include an exempted items list, one standard rate for majority of the goods and services and another having a moderate rate. Precious metals are likely to continue to attract 1% tax.

The proposed rate structure is aimed at bringing uniformity in tax compliance and facilitate maintenance of a single book of account for both state GST and Central GST payments by the business community, he said.

Many legislations like constitutional amendments to empower the Centre to impose tax beyond manufacturing stage and two separate bills for both the Centre and the states will have to be passed before the dual-structure GST is introduced.

It is now believed that these bills would be tabled in the Budget session as the current session of Parliament has only six days to go. 

Courtesy: - ET 16/12/2009

 Goods, Services Tax in final leg

A task force under the 13th Finance Commission has proposed a single 12% rate for the ambitious goods and services tax (GST) system that is expected to come into force next year.

The proposal, if adopted, can dramatically alter tax administration by giving a one-shot solution to a welter of levies such as excise, value added tax and Octroi. However, its implementation faces political hurdles, as it could rob the state governments of their discretionary fiscal power.

The Finance Commission, constituted once in every four years to recommend how the Central government should share fiscal resources with states, would shortly submit the task force report to the Finance Ministry, said an official.

The 12% rate will have a central component of 5% and a state component of 7%, according to the report reviewed by HT.

"This has the potential to increase the combined tax revenues of states by an estimated Rs 70,000 crore over a period of five years," the report said.

This is different from the structure proposed by an empowered committee of state finance ministers that had proposed two rates—a lower rate for essential items and a standard rate for general goods.

The task force has recommended the creation of a Rs 30,000-crore corpus to compensate states for revenue losses after shifting to the new regime.

Courtesy: - Hindustan Times 16-12-2009

FC proposes a 12% GST rate

New Delhi: The 13th Finance Commission has come out with a 'flawless' goods & services tax (GST) model, which proposes a single rate of 12% and exempts only three sectors: unprocessed food, school & college education and non-government health services. All businesses with an annual turnover of Rs 10 lakh and above would be brought under the tax net. Tax benefits for special economic zones would go, as these would become redundant in the new regime where exports would be zero-rated.

According to the report of the commission's task force on GST released on Tuesday and first reported by FE on November 26, the real estate sector would be integrated into the GST framework by subsuming stamp duty on immovable property levied by states. This would facilitate input credit and eliminate the cascading effect of the tax. Real estate transactions now attract only stamp duty at the output level, whereas the output incurs input taxes like Vat on construction material and service tax on specified works contracts.

The new tax, the authors of the report say, would have an economic value of 50% of GDP. It would reduce prices of manufactured goods, make house construction less expensive, but farmers would earn more for their produce.

The GST would have two components —central GST and state GST—levied on a common and identical base of transactions, with no differentiation between goods and services. The combined rate of 12% comprises 5% for central GST and 7% for state GST.

"The revenue neutral rate (RNR) we arrived at was 11%--5% for the Centre and 6% for states--but we decided to propose a higher rate of 7% for states with a provision to transfer the proceeds of 2% to local bodies," one of the report's authors told FE. To further allay states' concerns, the task force also proposed that they be allowed to retain stamp duty (revenues from which were Rs 39,000 crore in 2007-08) in the first year of GST before being phased out in the next three years. Further, the Centre would create a compensation fund with a Rs 6,000-crore outlay each year for five years.

Asserting that states would only gain in revenue, the official said, "We are proposing a Rs 1-lakh crore bonanza to states over their current revenue growth--a 16% increase from RNR would fetch them Rs 31,000 crore, the compensation fund would get them Rs 30,000 crore and the stamp duty proceeds...

Courtesy:- The Financial Express 16/12/2009