last week, the Centre and states agreed on including petroleum products within GST with states having the power to levy extra taxes on them without input tax credit facility, dropped the proposal to have a Dispute Resolution Authority chaired by a judge and decided on a phased roll-out of the new tax regime.
While states agreed to including petroleum products in GST as suggested by a task force set up by the 13th Finance Commission, a revenue-neutral GST rate to be introduced from 2014-15 is still elusive. The global average GST/VAT rate is around 16.4%. The average rate in the Asia-Pacific region is 9.88%, while Canada and Nigeria have the lowest rate of 5%.
Another key area to be decided upon is the threshold for GST to kick in. The task force set up by the 13th Finance Commission had suggested the abolition of the current Rs 1.5-crore exemption given on levy of central excise duty and recommended applying a threshold of Rs 40 lakh for GST. It also recommended a uniform and limited list of exemptions. As per this, petroleum products and alcohol are to be subsumed in GST on which states could levy extra tax without input tax credit. Besides, the real estate sector and the entire financial services sector should also be brought under GST. It also recommended that stamp duty, purchase tax, duties on electricity as well as taxes on goods and transportation to be subsumed in GST. The list of exemptions have to be common and minimal, it said adding that education, unprocessed food and select public services could be out of GST.