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The move is aimed at
making the proposed GST, a tax on consumption of goods
and services, simple to administer and fair to the
states. The legislative architecture being considered
seeks to absorb all the current cess into the GST and
also put in place constitutional provisions that will
restrict both the Centre and states from levying new
ones.
The empowered committee of state finance ministers is
expected to unveil the GST draft paper on November 10.
The draft may also propose creation of a ministerial
body having statutory powers to change the GST rates.
The ministerial body would have representation from the
Centre and states.
The arrangement would ensure GST is not undermined by
the kind of distortions that have crept into the value
added tax structure, with states imposing different
rates on the same good, exempting different goods and
following different procedures. The union finance
ministry will soon initiate discussions with the state
governments on the proposed constitutional changes and
concerned ministries on inclusion of cess in the GST.
“The idea is to keep the GST structure simple. Revenues
raised through the special cess on goods and services
should be built in the GST itself,” said the official
who did not wish to be identified. Discussions with
concerned ministries and departments will begin after
the draft for constitutional amendment to pave the way
for roll out of GST is ready, the official said. He said
the revenues raised through the cesses for the specific
purpose could be provided directly as part of the
planned allocation.
Tax experts also concur with this view.
“Internationally, there is no concept of cess. In fact,
most countries have opted for a single rate GST
structure to keep it uncomplicated and clean. The
government always has the option of hike the tax rate to
raise revenues instead of imposing cess,” said Prateek
Jain, executive director, KPMG.
Though, the states have been against levy of cesses by
centre as they do not get a share in the revenues raised
through it, they could still resist centre’s attempt to
take away their power to impose such a tax.
The Economic Survey 2008-09 had also suggested
withdrawing all cesses.
Funds raised through any central cess levied for
specific purpose under any law made by Parliament is not
to be shared with the states. The government’s
exhaustive documentation of the economy, the Economic
Survey 2008-09 had also suggested withdrawing all cesses.
Source :
Economic Times,
dated
09/11/2009
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