Centre, States differ on taxing alcohol, petro goods     

The Centre has rejected the States' suggestion that alcoholic beverages may be kept out of the purview of proposed Goods and Services Tax (GST) system. The Revenue Department has taken a stance that alcoholic beverages should be brought under the purview of GST and that the State excise duty can be charged over and above GST.

Two-rate structure

The Centre has also rejected the States' proposed move to adopt a two-rate structure. There should be a single rate of SGST both for goods and services. There should be one CGST rate both for goods as well as services, the Revenue Department has said.

Another important area where the Centre and the States now have a differing stance is on the levy of GST on petroleum products. The first discussion paper of the States suggested that sales tax continue to be levied by the States on these products with prevailing floor rate. However, the Revenue Department in the Union Finance Ministry has said that petroleum products may be levied to GST and in select cases credit of GST paid on these items may be disallowed in order to minimise the possibility of misuse.

The Revenue Department's comments on the first discussion paper on GST were released here on Monday. It has noted that keeping crude petroleum and natural gas out of the GST net would imply that the credit on capital goods and input services going into exploration and extraction would not be available resulting in cascading.

The Finance Ministry also said that electricity duty, purchase tax, octroi and taxes levied by local bodies should also be subsumed under GST. The Centre does not want the compensation package, if agreed, to have any link to any particular tax being subsumed.

Source: Hindu Business Line, India, dated 25/01/2010