States seek two GST rates

States and the Centre are yet to reach a consensus on the rate of proposed Goods and Services Tax as many states do not agree to a single rate for the new indirect tax, as suggested by the Union Government. Consensus is still evading states and the Centre on the GST rate, sources said. This is despite the fact that there are barely seven months left for the scheduled implementation of GST from April 1, 2010. 



Sources said the Centre wants a single rate for GST, possibly 8%, to be imposed by both the Union Government and the states, to which many states do not agree. Many states want two rates for GST like in the present system of VAT, they said. Currently, items attract mainly 4% or 12.5% in state-level VAT. 



Similar kind of structure is demanded by many states, sources said, but refused to elaborate further. This divergence of opinion emerged at recent meeting of Empowered Committee of state finence ministers here. Already some states like Tamil Nadu are pressing for deferring the timing of implementation of GST. 



After the meeting, committee chairman Asim Dasgupta said he recently went to Chennai and had “very useful” discussion with state finance minister K Anbazhagan. He refused to elaborate further. Dasgupta said the meeting discussed in detail the nitty- gritty of proposed GST structure relating to list of exempted items, limit of threshold, rate structure of GST items. He added, “We need another meeting very very soon, perhaps first week of September to conclude the process.” 



To a query, he said the Centre has already accepted dual model of GST. This means that both the Centre and states would impose separate GST on goods and services. Implementation of GST would require constitutional amendment as well, he said, adding that working groups of the committee would be working on the issue. Dasgupta said implementation of GST would lead to fall in prices of essential items, even as many states and the Centre would gain from it. 



“Overall burden of GST on price of essential commodities will fall. The incidence of burden of tax on the price of the commodity will fall. We want this to fall particularly in the case of essential goods,” Dasgupta said. If comes true, this will provide relief to the common man, reeling under the high prices of essential commodities. Dasgupta evaded a reply to a query whether essential commodities would be put on the negative list or there will be reduced rate for these items.