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While the states have
proposed two rates for goods under GST on the grounds that necessary items
should attract lower rate, the Centre has suggested one rate, saying a two-rate
structure would pose problems.
Opposing the Centre's proposal, Madhya Pradesh finance minister Raghavji at a
meeting of the empowered committee of state finance ministers on Friday said
Centre's suggestion will burden the poor. "Almost half of the population do not
get the required basic necessities of life. In this context, the suggestion of
the Centre for a single GST rate for both the daily necessities and the luxuries
defies logic," he said.
Arguing that the empowered committee should stick to the rate structure proposed
in the discussion paper, Raghavji said, "changes in the taxation policy which
are likely to adversely affect the living conditions of the poor cannot be
justified in the name of convenience of administration."
Not agreeing with the suggestion of the empowered committee, the Centre had
argued that a two-rate structure for goods is likely to result in inversions in
the duty structure with raw materials and intermediates attracting higher rate
and finished goods lower rates. This is will scuttle the very objective of the
new indirect tax regime as the intention is to apply the lower rate to only
necessities. Also, currently services are chargeable at a single rate. Adopting
a dual rate for goods would generate a similar demand for services too.
Both the Centre and the states have, however, agreed on the single rate for
services.
The Centre and states also do not agree on the threshold, the level below which
tax would not be levied. The states have called for Rs 10 lakh threshold for
state GST and Rs 1.5 crore for goods under the Central GST. They also want high
threshold for services under Central GST.
But the Centre is for a uniform threshold for both goods and services for state
GST and as well as Central GST.
Commenting on the issue, Bihar deputy chief minister and finance minister Sushil
Modi said, "there is almost consensus among the states that those having
turnover below Rs 10 lakh should be kept out of state GST and those below Rs 1.5
crore under the Central GST. But the Centre is not agreeing to this."
Empowered committee chairman Asim Dasgupta, however, said the meeting discussed
the nitty-gritty of the GST structure. "We need another interaction or so to
complete it," he said.
Dasgupta, however, exuded confidence that the GST would be implemented from next
fiscal. "After today's meeting, I am quite confident (in meeting the deadline),"
he said.
The earlier deadline for GST implementation was from April 1, this year. GST
would replace excise duty, service tax at the Central level and VAT at the
states end, besides local levies, surcharges, cesses.
To expedite the process, the Centre had conveyed his willingness to provide more
compensation to the states for meeting their revenue loss due to implementation
of GST, than Rs 50,000 crore, suggested by the 13th Finance Commission.
Finance minister Pranab Mukherjee had said in the budget that "it will be my
earnest endeavour to introduce GST along with the DTC (Direct Taxes Code) in
April, 2011."
However, finance minister of a state said states would need Rs 1 lakh crore
compensation and expressed its doubts whether GST would be implemented even from
new deadline.
Source: Economic Times, India, dated
23/05/2010
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