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While
the current tax rates on these products are very high, the
GST rates are expected to be moderate.
“Out
of the basket of petroleum products, crude, motor spirit
including aviation turbine fuel, and HSD may be kept
outside GST, as is the prevailing practice in India,”
the Committee decided in a meeting last week.
So,
the Empowered Committee has accordingly modified the draft
GST road map prepared by a joint working group.
The
modified draft guideline along with GST rates at both
central and state levels, will be submitted to Union
Finance Minister P Chidambaram by the end of January for
consideration.
Currently,
alcohol is taxed by states only at a floor rate of 20 per
cent, but the rates could be as high as 36 per cent. It is
a good source of revenue for many states. “Considering
requirements of several states, alcoholic beverages may
not be brought under GST,” the Committee decided. There
is no central excise on liquor.
The
working group had suggested to bring crude, petrol, diesel
and alcohol under the GST framework with input tax credit
and an additional tax over and above the GST at central
and state level without input tax credit.
The
other option suggested by the panel was to keep all these
outside GST structure.
On
taxation of tobacco, the Empowered Committee has made
slight modifications. While sticking to the recommendation
to keep tobacco products under the GST with input tax
credit, it has decided to allow only the Centre to levy
excise duty on tobacco products over and above GST without
input tax credit to ensure that its revenues are not
impacted.
Tobacco
is taxed at 12.5 per cent at the state level, while the
Centre levies excise duty on tobacco at various rates or
composite schemes.
The
Committee, which had recommended that exports should be
zero-rated, has agreed to provide similar benefits to
special economic zones (SEZs).
However,
such benefits should only be allowed to the processing
zones of SEZs. No benefit to the sales made from a SEZ to
Domestic Tariff Area should be allowed, it said in the
recommendation.
The
Committee has also taken a stand that both the Centre and
states would have to discontinue area- and industry-based
tax incentives. After GST introduction, exemption schemes,
if any, should be converted into cash refund schemes after
collection of tax.
The
burden of incentives must fall on a particular state or
the central government, while schemes remain unaffected.
All
states have discontinued incentive schemes for industries
with effect from 2000. However, incentives granted earlier
have continued.
Similarly,
the central government needs to discontinue the practice
of area- and industry-based tax incentives.
TIMELINE
FOR GST IMPLEMENTATION BY APRIL 2010
-
January
2008: Final draft GST road map to be sent to GoI
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February
2008: GoI to consider road map and adopt it
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March
2008- February 2009: Various amendments to
Constitution by GoI
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April
2008 - March 2009: Preparatory measures
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March
2009 - February 2010: Legislative measures by central
and state governments
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April
2009-March 2010: Other measures like publicity and
training
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April
2010: GST implementation
Source
:
Business
Standard - Mumbai, Maharashtra, India, dated 25/12/2007
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