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Finance
minister P Chidambaram had proposed the introduction of
GST from April 1, 2010 in the last Budget. He had asked
the empowered committee of state finance ministers to
prepare a road map. The empowered committee is now giving
final touches to its recommendations on the modalities of
GST, which looks all set to be announced in Budget
2008-09. The Planning Commission has already endorsed the
finance ministry’s view on launching GST from 2010 in
the approach paper to the 11th Plan.
The empowered committee has accepted the report on GST
submitted by the joint working group and has favoured
adoption of dual GST—central GST and state GST. There
would be more than one slab of tax for goods, but a single
rate for services. At the central level, the rates will be
decided by the Union government.
The attempt this time, both, by the Centre and states is
to keep the rates uniform, an objective which remained
unfulfilled to quite an extent in the value-added tax
regime. Set-off would also be available against tax paid
on inputs at both, the central and state levels.
The GST at the state level will subsume as many taxes on
goods and services as possible and feasible.
Implementation of GST would also require a constitutional
amendment to allow states to tax services. The panel has
suggested that subsuming levies like excise duty and
service tax into a single federal GST. States would need
to merge value-added tax and local levies into a
state-level GST.
The report of the joint working group has called for doing
away with area or industry-based exemptions. It has
suggested that, if at all some incentive is to be given,
it should be in the form of direct subsidy. This will help
in keeping the GST rate low by expanding the tax base.
Moreover,
the emphasis is on keeping the deviations minium and
having a common exemption list. Both, the Centre and
states would fix a uniform turnover limit, below which no
GST would be levied. At present, there are vast
differences. The excise exemption threshold is Rs 1.5
crore, for services tax Rs 8 lakh and for VAT ranges from
Rs 2 lakh to Rs 10 lakh. Taxpayers will be given a
PAN-based taxpayer identification number, with two extra
digits to distinguish between central and state GST.
In case of taxation of services, the joint working group
has recommended a destination-based taxation, implying
that tax would be collected in the the state where the
service is consumed.
Source
: Economic Times - Gurgaon, Haryana, India, dated
08/02/2008
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