Meeting after an hiatus of over three months, the empowered committee of state finance ministers on Wednesday explored the possibility of an 8% state level rate for the Goods and Services Tax (GST), even as FMs of states ruled by the Bharatiya Janata Party (BJP) expressed concerns about the tax. This was the first time when the empowered committee has held a discussion on possible rates for the proposed tax.
An 8% rate at the state level for GST is an indication that the tax may be levied at rates lower than the expected 20%. In fact, a study by the 13th Finance Commission has revealed that 16% would be a revenue neutral rate for GST. An 8% rate, however, is lower than the existing service tax of 10% and value added tax rate of 12.5%.
Madhya Pradesh finance minister Raghawji is learnt to have expressed reservations about the introduction of GST from next April and probable revenue losses under it. Following the EC meeting, Raghawji and finance ministers of BJP ruled states like Karnataka and Bihar went to meet former Union finance minister under the NDA Yashwant Sinha to discuss their reservations.
While Asim Dasgupta, chairman of the empowered committee and West Bengal finance minister declined to comment on the rate structure, he said after the meeting, ?We had a fairly detailed discussion with the ministers on the structure of GST…We are setting a target date by August end for tying the loose ends.? The issue is also expected to be discussed at the pre Budget meeting of state finance ministers with Pranab Mukherjee on Thursday. GST, which will subsume service tax and excise duty along with a plethora of state level taxes and duties, is scheduled to be introduced from April 1, 2010. A dual structure of GST with separate rates for the Centre and the states has already been agreed upon.
Dasgupta said the committee will be meeting very frequently now on GST after which it will have discussions with the trading community, industry, the agricultural sector and public. ?We want a very rapid and widespread discussion before launching the GST from April 1, 2010,? Dasgupta said. He exuded confidence that introduction of GST would meet the deadline of April 1, 2010. ?That is what we are aiming at,? he said.