State FMs agree on 2-tier GST  

In a clear step towards unrolling of GST by April 1, 2010, the Empowered Group of State Finance Ministers on Wednesday reached a consensus on having a two-tier unified rate on Goods and Service Tax (GST).

The duty structure would include a standard rate and a lower rate for essential commodities. "We have reached a consensus so far as states' GST is concerned. There will be two rates, one standard rate and the other a lower rate for essential commodities," the empowered group chairman and West Bengal FM Asim Dasgupta said. The GST will replace all existing taxes like excise, service tax and other local duties.

The empowered group meeting was attended by state FMs and officials of the Union finance ministry. The state FMs agreed to have a "special rate" for a small list of precious metals and a list of exempted items.

Dasgupta said there will be a "conformity" in rates between the Centre and states. It has already been decided that there will be a dual model of GST — separate GST for the Centre and the states.

The empowered group also decided to immediately set up a joint working group to decide on a framework for a constitutional amendment for the purpose of introducing GST and a framework for a model legislation on GST for the Centre and the states. The joint working group will comprise officials of the finance ministry and other ministries of the Union government, and finance secretaries or commissioners of commercial taxes from states, Dasgupta said.

The BJP, which was earlier opposed to the proposed implementation date and had concerns that it would result in rise in prices of essential commodities, struck a conciliatory note on Wednesday.

Speaking to TOI, senior BJP leader and former FM Yashwant Sinha said the roadmap proposed for GST was a dual rate for states and if that was agreed upon it was a move in the right direction. Sinha also hailed the setting up of the joint working group as the states too would have to frame the legislation and get it passed from the assemblies.

A day before the state FMs' meet, the BJP top brass had held a brainstorming session with finance ministers of NDA-ruled states where many of them had expressed concerns of possible loss of revenue and increase in prices of essential commodities.

Chhattisgarh, Haryana, Tamil Nadu and Rajasthan had also expressed reservations over the introduction of GST from the beginning of the next fiscal. However, Dasgupta said some of the issues raised by certain states have been resolved while discussions on others are continuing. The joint working group is likely to submit its report in the next two months.

"We think we do not have any time to lose. Therefore, the framework for constitutional amendment is necessary as soon as possible, in a time bound manner," the West Bengal FM said.

Source : Times of India, India,  dated 17/09/2009