Working group recommends dual goods and service tax

India may go in for a dual goods and service tax (GST) system at the Centre and State levels if one were to go by the current thinking within the Empowered Committee of State Finance Ministers on value added tax (VAT).

A joint working group set-up by the Empowered Committee has recommended a dual GST system for the country. These recommendations were accepted at a meeting of the Empowered Committee here on Wednesday.

“The Empowered Committee has accepted the report on GST submitted by the joint working group which has recommended adoption of dual GST,” Mr Asim Dasgupta, Chairman of the Empowered Committee and the Finance Minister of West Bengal, told reporters after the meeting.

Final recommendations

He added that the Empowered Group of State Finance Ministers on VAT would send its final recommendations to the Centre next month after the state finance ministers give their views in writing.

The working group, constituted in May this year, included the Central Government and the State Government officials. Under the dual GST model, to be implemented from 2010, there could be more than four rates of taxes on goods and services.

For example, there will one or more tax on goods, but one rate for services at the Central level. Similarly, there will be one or more tax on goods, but one rate on services at the State level.

The GST by the Central Government and the State Government will be on the entire chain of production. The Centre and State will give tax credit to companies on the input tax levied by them separately.

“In a nutshell, within the framework of GST, there would be more than one slab of tax for goods, but a single rate for services at the State level. At the Central level, the rates will be decided by the Union Government,” Mr Dasgupta said.

“Like VAT, there would be a set off, that is amount of tax paid on inputs would be reimbursed, at both the Central and State levels. And the GST at the State level will subsume as many taxes on goods and services as possible and feasible,” he added.

Mr Dasgupta, however, said that the exact rates at the State and Central level would be decided later.

He also said that efforts would be made to ensure that there is no double taxation on any goods and services between the Centre and States, which is there on some goods under the present dispensation.

The implementation of GST would also require Constitutional amendment at the Central level and also at the State Legislative level to give rights to States to levy services tax.

Mr Dasgupta expressed the hope that the proposed GST would increase the revenue for States and the Centre and reduce the problems of industry, trade, agriculture and common consumer.

Another round of discussion would be held on December 20 after the recommendations of the various State finance ministers are submitted.

Mr Dasgupta also said that the Uttar Pradesh Government have already sent their draft legislation Presidential assent through the Union Finance Ministry to switch to the VAT system.

Source : Hindu Business Line - Chennai, India, dated 28/11/2007