|
GST,
which will replace almost all central and state taxes,
could have two components of 8 per cent each — one will
go to the Centre and the other to the states, according to
sources familiar with the talks between the Centre and the
states.
However,
it will not cover tax on petroleum products and Customs
duty.
“Key
negotiators on behalf of the states and the Centre are
keen that there is a single GST rate structure, one at the
central level and the other at the state level,” said a
source, adding that the structure would take a firm shape
after a meeting with Prime Minister Manmohan Singh.
Under
GST, both the Centre and the states will have powers to
tax goods and services. At present, the states cannot tax
services.
A
few states are also demanding freedom to have two slabs
under their component of GST so that items like medicines
can be taxed at lower rates. In case it is decided to have
two slabs, one rate could be 10-11 per cent and the other
around 5 per cent.
The
empowered committee of state finance ministers will meet
the prime minister, who also handles the finance
portfolio, before February 12. The empowered committee,
the highest body of state finance ministers, also has
representatives from the central government.
GST
will subsume central excise, service tax, state sales tax
and central sales tax. At the moment, central excise rates
are 10 per cent, 8 per cent and 4 per cent, the service
tax rate is 12 per cent, state sales tax rates are 12.5
per cent and 4 per cent, while the central sales tax rate
is 2 per cent.
“There
is a convergence of views between the empowered committee
and the Union finance ministry on the dual GST model.
Rates will be very few and aimed at giving relief to
trade, industry, agriculture and consumers,” Asim
Dasgupta, West Bengal’s finance minister and the
chairman of the empowered committee, said after a meeting
on GST issues with state finance ministers here.
The
revenue-neutral rates will be determined after calculating
the revenue loss to states under the new system and
additional income from tax on services.
The
single GST rate structure will benefit both the Centre and
the states. The scope of service tax will be expanded to
all services. At present, a little over 100 services are
taxed.
Similarly,
area-based exemptions to industry will be phased out and
common and minimal number of goods and services will be
phased out.
Source
: Business Standard - Mumbai, Maharashtra, India, dated
22/01/2009
|
