GST NEWS

 

 

 

The government may have promised consumers that they will be able to enjoy a flat tax rate on goods and services across India's many states and territories by April 1.

But it seems that might be nothing more than a pipe dream. The rates could be as high as 15 per cent if states hold onto their demands.

The saga over the goods and service tax (GST) continues. On Wednesday it received a new twist with a majority of the states rejecting the 12 per cent GST rate recommended by a committee of the 13th Finance Commission.

Infact, states are now demanding that GST should kick in only in 2011.

Except Kerala, most of the states have indicated GST cannot be implemented before April 1, 2011 and none of the states are ready to accept a revenue neutral rate below 15 per cent.

Infact, most of the states are indicating a state GST rate of a minimum 15 per cent.

This turns the key recommendations of the 13th Finance Commission on its head, which has suggested 7 per cent as state GST rate, 12 per cent as the revenue neutral rate and implementation of GST by October 2010.

Interestingly, even senior members of NIPFP, the other body which has given its recommendations on GST, do not agree with what the 13th Finance Commission has suggested.

Sushil Kumar Modi, deputy chief minister of Bihar, said, “Anything below 15 per cent is unacceptable. This is the majority view of the empowered committee. We will communicate this to the 13th Finance Commission.''

Raghavji, finance minister of Madhya Pradesh, said, “GST should not come before 2011. What is the rush? Wait for one year.”

In the meanwhile, Asim Dasgupta, chairman of empowered committee of state finance ministers, has indicated they will meet Pranab Mukherjee in the first week of January to flag off these issue, including the draft constitutional amendments required for GST, which now stand delayed.

It’s crystal clear that GST is not implementable by April 1, 2010, which means the coming Budget will focus on indirect tax rates, independent of the GST.

So, now it remains to be seen, what Mukherjee will do about the stimulus measures, the fiscal sops given to prop up the economy.

Courtesy: - NDTV.com

NEW DELHI: The Empowered Committee of State Finance Ministers on Goods and Services Tax (GST) on Wednesday decided to have a meeting with Finance Minister Pranab Mukherjee on January 7 to thrash out certain constitutional and administrative hitches pertaining to the new indirect taxation regime even as a task force set up by the Thirteenth Finance Commission (TFC) has suggested deferment of its introduction by six months to October 1, 2010.

Briefing the media after the empowered panel’s meeting here, Committee Chairman Asim Dasgupta said: “For certain difficulties [which] were reported to us, it would be difficult to introduce the Bill for GST in this winter session…He [Pranab Mukherjee] has said he is very willing to discuss with us in January after this Parliament session is over.

“After our meeting with him, we would be able to take a decision on constitutional amendment and other preparations”.

Alongside, with the TFC task force coming out with suggestions which are at variance with the empowered panel’s views on the GST slab rates and the date of its implementation, the proposed introduction of the new combined levy on both goods and services covering almost all sectors and industries from April 1, 2010, has come under a cloud.

For, while the task force has suggested postponement by six months, empowered committee member and Bihar Finance Minister Sushil Modi noted that the GST could be delayed by an entire fiscal year.

Courtesy: - The Hindu

 

 

 

17 Dec 2009, 0258 hrs IST, ET Bureau

NEW DELHI: States have suggested a rate of 15%-plus for the goods and services tax (GST) even as doubts deepened over the rollout of this comprehensive indirect tax reform on April 1, 2010.

The empowered committee of state finance ministers has written to the Thirteenth Finance Commission to work out the compensation to states based on a minimum rate of 15%, a day after an internal task force set up by the commission recommended a single rate of 12%.

“States want the GST rate to be pegged at 15%-plus... The empowered committee has written to the Thirteenth Finance Commission,” Bihar finance minister Sushil Modi told reporters.

Finance commissions are charged with deciding the formula for allocation of revenue resources between the Centre and states, and among the states as well.

The states fear that they may lose revenues once the GST is rolled out as the revenue neutral rate agreed may not impact the aggregate collections, but at the individual states level there could be gainers and losers.

The compensation, which will be over and above the sharing of revenues proposed by the finance commission, would cover such losses.

If the suggestion finds favour with states, the GST rate could be pegged at around 15-16% including both central and state component.

GST is a single levy, though it could have state and central component that would replace the plethora of indirect taxes. These levies include excise duty, service tax, additional customs duty, surcharges at the centre and value added tax and local taxes such as entertainment, luxury, entry tax at the states’ level.

 

GST, which is in the nature of a consumption tax, seeks to create a seamless pan-India market with both manufacturers and service providers having the right to offset state taxes paid on inputs sourced from another state.

At present the national market is fragmented along state boundaries because of the differences in the indirect tax regime across states.

The empowered committee’s draft paper on GST has pitched for a dual GST structure— one rate for states and one rate for the centre. Besides, there would be two slabs— one floor rate for essential items and one standard rate for general items, a special rate for precious metals such as gold, platinum and exempted list of items.

The 15-16% would be the standard rate applicable on non-essential items and is in line with the internal projections made by the central government and state government officials working on the GST framework, a government official, privy to the deliberations said.

However, a single GST rate has been proposed for services without slabs. Mr Dasgupta, however, declined to give details of the rate structure that was being considered.

The empowered committee will meet the finance minister Pranab Mukherjee on January 7 to sort out the issues related to constitutional and administrative changes related to the introduction of the new tax regime.

“After our meeting with him (finance minister), we would be able to take a decision on constitutional amendment and other preparations,” panel chairman and West Bengal finance minister Asim Dasgupta said.

But, he noted that the panel had been told by the centre that for certain difficulties it would be difficult to introduce the Bill for GST in the current winter session.

Asked about the recommendations of the Task Force, Mr Dasgupta said, “We have taken a note of it. We will consider it among the other proposals from industry, trade.” 

Courtesy: - Economic Times