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The Government is looking
to introduce a dual GST system, which will be a milestone for the indirect tax
reforms.
The Centre has now agreed with the States' proposal that ATF, crude, motor
spirit and high speed diesel (HSD) be excluded from the proposed GST regime, the
CBEC Member, Mr S. Dutt Majumder, said at an Amcham India event here on Monday.
This means that ATF will continue to be subjected to sales tax ranging from 4 to
30 percent even after the GST system is introduced.
Mitigation of cascading effect of taxation is one of the perceived benefits of
GST to trade. However, with ATF's exclusion from GST, the cascading effect is
unlikely to be mitigated. The input tax on ATF paid by the airlines will most
likely be passed on to the passengers (without any set-off benefit), Mr Pratik
Jain, Executive Director, Tax and Regulatory Services, KPMG, told Business Line.
There are strong indications that commercial domestic air travel services will
be subjected to GST. The Finance Ministry is mulling the introduction of a
positive list for service that will be under GST although the States are for a
concept of negative list on services.
As part of the first discussion paper on GST released in November last year, the
Empowered Committee of State Finance Ministers had suggested that petroleum
products and alcoholic beverages be kept out of GST.
However, a task force set up by the Thirteenth Finance Commission had in
December last recommended that emission fuels, alcohol and tobacco be subject to
dual levy of GST and excise without any credit of the excise component. For
industrial fuels, the task force had suggested that such fuels be subject to GST
only.
Meanwhile, to ensure that States do not unilaterally change GST rates when the
new tax system comes into force, the Finance Ministry is mulling setting up a
new committee that may be headed by the Finance Minister. “Every time the States
or the Centre want to change the GST rates, prior approval of the committee will
be required. This concept is currently in the proposal stage and no final
decision has been taken”, Mr Majumder said.
Source:
Hindu Business Line, India, dated
18/01/2010
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