|
This
sector was also kept out of the State-level value added
tax (VAT) system, which was introduced on April 1, 2005 in
21 States.
In
the case of liquor and tobacco, indications are that
certain components are likely to be within the GST and
some outside. Also, the taxes collected by local bodies
would not get subsumed in the proposed GST system.
“There
is a reason for keeping the taxes of the local bodies out
of the GST system. We are having so much difficulty in the
Centre dealing with just the States. We need to have
compensation mechanism and tackle issues like how their
revenues would be neutral after GST implementation.
“If
you bring in the third component of urban local bodies and
rural panchayats into the picture, you are going to
multiply the problem by about ten times. The present
consensus is not to touch it (taxes of local bodies),”
the official said.
Both
the Centre and the States are yet to finalise the GST
rates and discussions are on in this regard at the level
of the Empowered Committee of State Finance Ministers on
VAT.
Under
the proposed GST regime, the Centre will give input tax
credit (set off) only for Central GST. The States will
give input tax credit only for State GST. Cross-utilisation
of credit between Central GST and State GST will not be
allowed.
Meanwhile,
the Government is looking to set up a new “central
authority” to look into the issue of deviations made by
States from the agreed rates.
The
main taxes that the proposed GST regime would subsume are
Central excise, State VAT, service tax and countervailing
duty.
“These
are the main components. The rest are not important from
the revenue point of view, but they are important from the
trade point of view.
“There
is also a general consensus that it would subsume all
cesses and surcharges levied by the Centre and States on
these taxes. It will also subsume entry tax (not in lieu
of Octroi). Entertainment tax collected by States will be
subsumed,” the official said.
Source :
Hindu Business Line - Chennai, India, dated
30/06/2009 |
