ICAI proposes dual taxation structure for GST roll-out

Last updated: 06 November 2007 Follow on Google News

The Institute of Chartered Accountants of India (ICAI) on Monday recommended that Goods and Service Tax (GST), proposed to be implemented from 2010, should have dual tax structures at the Centre and state levels. The GST is expected to create a common Indian market, but there is no unanimity over the model to be adopted, whether there should be one tax structure or two tax structures at the Centre and state levels. A sub-group has been constituted by Empowered Committee of State Finance Ministers on VAT to chart out a model and a roadmap for GST. ICAI in its recommendations to this sub-group suggested that there should be two levels operating parallelly, one at Union level and other at State level, said Council Member Bhawana Dhoshi. It is the most workable model, especially taking into consideration the changes required in the Constitution and achievability in the short-term, she said. The model builds on the current structure of taxation of goods and services and does not envisages drastic changes in the broad mechanism for levy and collection of taxes, she added. As per the recommendation, the central level tax would be at 12 per cent while the state level taxes would come down to 6-8 per cent. Hence the total GST Tax would be around 20 per cent. At the central level, excise and service taxes are supposed to converge into GST. However, only the Centre should collect tax on three services, telecom, transportations, banking and financial services, while other services could be taxed by both. Certain amendments in existing legislation are required for implementing GST, she said, adding the recommendations would be submitted tomorrow. There would be need to consolidate separate entries in the Constitution empowering Union and State governments to impose taxes on manufacture and sale of goods and services into one entry which enables both the central and state government to impose tax, she added.

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