It has proposed a zero rate for exports though it
is not in favour of any special dispensation for the
special economic zones (SEZs).
For inter-state transactions, the taskforce, in
its report, recommended zero-rated structure through
adoption of the modified bank model. Pending
constitutional amendment, the report suggested that the
collection from 7 per cent state GST should accrue to
the state government and devolution to the third-tier
(local) government should be made based on
recommendations of state finance commissions.
The exemption list includes public services of
Union, state and local governments, service transaction
between an employer and employee, unprocessed food
articles sold under the public distribution system,
educational and health services provided by
non-government schools, college and agencies.
I
t
has favoured doing away with area-based exemption and
replacing it with direct investment-linked cash subsidy
in case the government wants to support industry for
balanced regional development.
The taskforce has also recommended that “sin” goods
comprising emission fuels, tobacco products and alcohol
should be subject to a dual levy of GST and excise with
no input credit for excise. “However, industrial fuels
should be subjected only to GST with the benefit of
input credit like any other intermediate good,” the
report said.
Central taxes proposed to be subsumed in GST are central
excise duty, including additional excise duty, service
tax, additional customs duty, all surcharges and cesses.
Among state taxes that should be subsumed are value
added tax, including purchase tax and central sales tax,
and entertainment tax, among others.
In recommending what it terms as a “flawless” GST, the
taskforce, headed by Arbind Modi, joint secretary,
Department of Revenue, has made wide variations from
what was proposed by the empowered committee of state
finance ministers in their first discussion paper
released last month.
The discussion paper had recommended a two-rate
structure for both state GST and central SGT while
keeping the purchase tax levied by states like Punjab,
Haryana and Uttar Pradesh out of the purview of GST.
The discussion paper had recommended a dual rate
structure for CGST and SGST with a single rate for
services. The finance commission taskforce, however,
said “there should be no classification between goods
and services in law so as to ensure that there is no
classification dispute”.
The state governments will meet tomorrow to discuss the
fine contours of GST as the scheduled date (April 1,
2010) for its introduction draws closer.
Even in the case of exempted items, the discussion paper
did not list the items but favoured retaining the
exempted list of value added tax and Central VAT which
is currently around 100.
|
PROPOSALS |
|
* A zero rate for
exports though it is not in favour of any
special dispensation for the special economic
zones |
|
* It has favoured
doing away with area-based exemption and
replacing with direct investment-linked cash
subsidy |
|
* The taskforce has
also recommended that 'sin' goods comprising
emission fuels, tobacco products and alcohol
should be subject to a dual levy of GST |
The taskforce in its report has suggested that small
dealers, service providers and manufactures with an
annual turnover of less than Rs 10 lakh should be
exempted from both CGST and SGST though they could
voluntarily register themselves for GST in order to get
the benefit of input credit. The discussion paper had
suggested Rs 10 lakh as threshold for SGST and Rs 1.5
crore as threshold for CGST.
In order to reduce administrative and compliance burden,
the taskforce report proposed compounded levy of one per
cent each for CGST and SGST for those with turnover of
Rs 10 lakh to Rs 40 lakh with “no input credit allowed
against compounded levy or purchases made from exempt
dealers”.
