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States like Delhi,
Punjab, Maharashtra, Kerala and Karnataka and
Chhatisgarh earn around 40 to 50 per cent of their
revenues from levies on alcoholic beverages and
petroleum products such as petrol, diesel and jet fuel
and were staunchly opposed to any change in the existing
tax system for these products.
As a result, no decline in the prices of these products
is expected when the switch to the new GST system will
happen.
A final view on whether compressed natural gas (CNG)
will also be taken out of the purview of GST will be
taken after further deliberations.
Punjab finance minister Manpreet Singh Badal said his
state collects "Rs 2,000 crore every year through levies
on alcoholic drinks which account for 25 per cent of the
revenue while petro goods contribute another 15 per
cent. Besides taxes on these commodities are easy to
collect." The government had announced that the new GST
system would be introduced from April 1, 2010, but this
deadline is likely to be missed as no agreement has been
reached as yet on the amount of compensation to be given
to the states for the projected loss in revenue in the
initial years.
The states expect the Centre to compensate them for any
loss in revenue that might occur during the process of
implementation of GST for the next five years.
Finance minister Pranab Mukherjee said the Constitution
would also have to be amended to implement the new tax
system and this will take its own time as various
legislative procedures have to be followed.
West Bengal finance minister Asim Dasgupta, who heads
the empowered committee of state finance ministers,
released the first discussion paper on GST on Tuesday
after a meeting with the Union finance minister.
The government has decided to go in for a dual GST model
which will consist of a Central GST and a State GST. The
Central GST will replace indirect taxes such as Central
excise duty, additional excise duty, service tax,
additional customs duty (countervailing duty), special
additional duty of customs, surcharges and cesses.
The State GST will replace the current value- added tax
(VAT), sales tax, entertainment tax, luxury tax, taxes
on lottery, betting and gambling, state cesses and entry
tax levied by state governments.
The taxpayer would need to submit periodical returns, in
common format as far as possible, to both the Central
and State GST authorities.
Dasgupta said the empowered committee has decided to
adopt a two-rate structure-a lower rate for necessary
items and goods of basic importance and a standard rate
for goods in general which will be higher.
There will also be a special rate for precious metals.
Apart from this there will be a list of items that will
be exempted from tax.
The committee has also decided that no tax will be
levied on exports and this benefit will also be extended
to the processing zones of special economic zones (SEZs).
However, no benefit will be given on the sales from an
SEZ to a domestic tariff area.
Dasgupta said the objective of the GST is to ensure that
there is "no tax on tax." This was achieved to some
extent under VAT but has to be taken further.
GST is basically a tax on goods and services that is
levied only on the value addition at each stage from the
factory to the retail sale outlet. The final consumer is
expected to bear only the GST charged by the last dealer
in the supply chain, with set-off benefits at all
previous stages.
Source :
India Today,
India,
dated
11/11/2009
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