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The Empowered Committee
of State Finance Ministers released the first discussion
paper on the GST, which is scheduled to be rolled out on
April 1, 2010.
However, finance minister Pranab Mukherjee, who was
present on the occasion, made it clear that the
discussion paper was a joint effort of the states.
“These are the views of the Empowered Committee of State
Finance Ministers. We will also look into it,” he said.
While states have proposed to levy the tax on small
traders and producers, they have suggested that the
Centre keep the threshold for central GST at the
existing level of Rs 1.5 crore and raise the threshold
for taxation of services that currently stands at Rs 10
lakh.
The Centre is, however, not in favour of differential
threshold arguing that such a structure shrinks the tax
base and, thereby, imposes higher rates and complicates
tax administration.
These differences underscore the amount of work that has
to be done for the April 1, 2010, rollout deadline to be
met. Some states, including Gujarat, Madhya Pradesh and
Haryana, have already sought extension of the deadline
in view of paucity of time.
Chairman of the empowered panel Asim Dasgupta was
somewhat more optimistic and said timelines had been set
for the groundwork to ensure rollout from April 1, 2010.
“This is the first discussion paper. The final model of
GST will be worked out after discussions with all
stakeholders,” Mr Dasgupta said.
The draft constitutional amendment that will allow
states to tax services and imports and the Centre to
levy tax at trade level is to be finalised by November
15. The Centre has also agreed to provide compensation
to states for phase-out of central sales tax and all
rarer claims on this count would be settled by November
20.
The GST model proposed in the discussion paper also
seeks to expand the tax net by bringing small traders
and manufacturers with an annual turnover of Rs 10 lakh
under tax net and allowing special industrial area
exemption schemes to lapse.
The paper has also suggested that tax exemptions related
to industrial incentives should be converted into cash
refund schemes after collection of tax to ensure the GST
chain is not disturbed. But special schemes that provide
excise duty exemptions in states such as Himachal
Pradesh, Uttarakhand and the North East would continue
up to legitimate expiry time both for the Centre and
states.
Despite some issues, tax experts view the paper as a
first big step. BMR Advisors partner, leader (indirect
tax) Rajeev Dimri said: “The paper provides insight into
the plan for common taxation of goods and services in a
seamless manner. The mechanism for transfer of credits
across states is a great step forward in consolidating
India into a common market.”
The goods and services tax would also be levied on
inter-state sales. This IGST would be levied by the
Centre and then appropriated to the states. A central
agency will act as a clearing house mechanism that will
verify and inform the respective governments to transfer
the funds.
Taxpayers will also have access to a dispute resolution
and advance ruling mechanism under the GST regime.
Source :
Economic Times,
India,
dated
11/11/2009
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