Centre pitches for petroleum, alcohol in GST list      

Contrary to the views of state governments, the Centre on Monday pitched for including petroleum products and alcohol in the proposed goods and services tax regime (GST).

It also wants to subsume within GST the state taxes such as purchase tax, electricity duty and other local taxes and has sought a uniform turnover threshold of Rs 10 lakh under the proposed tax regime.

In its reply to the discussion paper by the Empowered Committee (EC) of state finance ministers on GST, the Centre has called for a single tax rate for goods and services at both the Central and state level.

“The exact rate of state and Centre GST must be known before implementation . A two rate structure would pose problems,” the department of revenue has said.

It has however agreed to continue with the list of 99 items that are currently exempt from paying VAT.

The EC in its discussion paper had proposed multiple rates for taxing goods, almost similar to the current system of value added tax. It has also suggested a uniform threshold of Rs 10 lakh for goods and services at the state level, while for central GST it had said the threshold should be kept in sync with the current position.

The difference in opinion could further delay the introduction of GST. Its roll out has already been deferred from April 1, 2010. The EC is scheduled to meet Union finance minister Pranab Mukherjee later this week to discuss the final structure of the tax as well as a fresh date for implementing it.

The Union finance ministry is also in favour of an ‘appropriate binding mechanism to harmonise the various important aspects of the GST like rate structure, taxation base, exemption between Centre and States.’ The ministry hopes that such a mechanism will ensure that states do not change tax rates arbitrarily, like they do under the value added tax regime. States on the other hand are keen to preserve their ‘fiscal autonomy’ and want to have the ability to change tax rates.

Source: Economic Times, India, dated 26/01/2010