Final GST draft could be out by May     

The final draft for the goods and services tax (GST), the much-awaited indirect tax reform, could be out by May this year, after the empowered committee of state finance ministers meet next month. The draft’s release, an important step for introducing GST by April next year as scheduled, has to be carried out by May. This is because the 2011 elections in West Bengal will decide if the chairman of the empowered committee of state finance ministers, Asim Dasgupta, will continue in his capacity. Dagupta is expected to play a crucial role in steering states to a consensus on the rates and the tax base—the contentious issue among states and the Centre.

The final GST draft, which will sketch out the contours for the tax structure, has to be completed by May if the Centre wants to meet the 2011 deadline prescribed by finance minister Pranab Mukherjee, a senior finance ministry official told FE. “May seems to be the appropriate time for the presentation of the final draft. If the draft is not presented in May, bringing in GST by the next year would be extremely difficult,” the official added.

Moreover, there are fears that after the elections in West Bengal, Dasgupta, who is known to have immense persuasive powers, may not remain in the position to iron out differences among states and arrive at a consensus regarding the rate and tax base, a few ministry officials pointed out.

Amid all this, the April meeting of the empowered committee assumes significance since it is slated to give the final touches to the GST’s structure. Though the rates would be somewhere around 15% — considering both states and the Centre — there were reports that the Thirteenth Finance Commission had recommended a 12% GST rate—5% for the Centre and 7% for the states.

The goods and services tax would subsume most of the indirect taxes at the central and the states level, including excise duty, service tax and state VAT. The tax structure proposed earlier was scheduled to be implemented by April, 2010 but the deadline had to be postponed owing to the lack of a single voice among the states regarding the tax rates and the base.

The empowered committee has already come out with a discussion paper on GST saying it would have a dual structure—a central levy and a state levy— an issue not disputed by any stake holder till now. The finance ministry has also come out with its comments on the GST discussion paper.

Source: Financial Express, India, dated 23/03/2010