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Citing
the recommendation on a dual GST by the empowered
committee of state finance ministers, the survey said a
dual GST strikes a good balance between Centre and state
fiscal autonomy, along with eliminating tax cascading.
"It
empowers both levels of government to apply the tax to a
comprehensive base of goods and services, at all points in
the supply chain. It also eliminates tax cascading, which
occurs because of truncated or partial application of the
centre and state taxes," said the survey.
Despite
improvements in the country's tax design and
administration over the past few years, the systems at
both central and state levels are still complex, said the
survey.
The
complexities, it says, are policy related and also due to
the present system of multiple rates and exemptions at
state and Centre level.
The
survey noted that deficiencies in Cenvat (central value
added tax) and service tax are grave and need to be looked
at. For instance, Cenvat’s already narrowed base is
being further eroded by a variety of area-specific
exemptions. "The introduction of GST would thus be
opportune for deepening the reform process already
underway," the survey said.
GST
would replace these multi-stage taxes like Cenvat and
service tax levied by the Centre and the VAT levied by
states.
To
facilitate the introduction of GST, the central sales tax
(CST) was to be phased out by reducing the CST rate by 1
per cent every year. However, the CST rate today stands at
2 per cent because of the issue of compensating the states
for the resultant revenue losses.
For
FY 2007-08 and FY 2008-09, the government has received
claims of Rs 5,017 crore till March 31, 2009. About Rs
4,119 crore has been released and the balance claims are
being processed.
Source :
Business Standard - Mumbai, Maharashtra, India, dated
03/07/2009 |
