The Centre and the states may have agreed to introduce a dual goods and services tax (GST) regime in the country, starting next April. But to finalise the crucial issue of the rate at which the tax will be levied, the empowered committee of state finance ministers has now set up three sub-committees to work out the modalities of the tax.
One of the sub committees has been asked to working out revenue neutral rates for GST. Although, a study by the 13th Finance Commission had revealed that a 16% rate for GST would be tax-neutral, the Centre and states are yet to discuss the rate structure. While states have indicated that they would prefer GST to be levied at 20%, the Union finance ministry has been non-committal on the issue. Tax experts however say that the recent rate cut in excise duty and service tax point towards a 16% rate for GST.
Meanwhile, the second panel is finalising the list of exempt commodities under the proposed tax and the third is reviewing the phase-out of central sales tax. States have demanded that high revenue yielding items like petroleum and petroleum products, tobacco and liquor should be kept out of the ambit of GST. Alternatively, states should have the right to impose additional taxes on them. There is also ambiguity on the inclusion of other state level duties like entertainment tax and octroi in the GST regime.
The sub-committees are expected submit their reports by the month end. These will be taken up by the Empowered Committee for discussion in its next meeting. While the date for its next meeting is yet to be finalised, its expected to be scheduled for early June, by when the government formation process at both the Centre and states of Orissa and Andhra Pradesh will be over.