Taking forward its agenda of fiscal reforms, the Thirteenth Finance Commission is slated to hold discussions with the department of revenue over the proposed model of the goods and services tax (GST) later this month.
The commission, headed by Vijay Kelkar, one of the key architects of GST in India, is expected to review the planned structure of the tax in order to assess its impact on the Centre and the states? tax kitty. It will accordingly, come out with a new basis for devolution of taxes between the two.
?The commission needs to be briefed about the system for levying GST so as to understand which taxes will be subsumed under it and how would it affect the finances of the Centre and the states,? a source close to the development said. At the same time, North Block is also expected to seek the commission?s views on the tax model and propose any changes, the source added. The department of revenue in the finance ministry is currently finalising the structure of the tax, based on the recommendations of the empowered committee of state finance ministers. The state panel has suggested a dual structure for GST with separate taxes at the Centre and the state level. Once these consultations are over, the final view of the ministry will then be communicated to finance minister P Chidambaram. Simultaneously, the Finance Commission is also understood to be meeting industry associations to get their views on the planned model of the tax, which is expected to be an omnibus levy replacing all state and Central indirect taxes.
As part of the terms of its reference, the Thirteenth Finance Commission has been entrusted with the task of preparing a roadmap on the GST. It has also been asked to evaluate the impact of the proposed tax, including its effect on foreign trade. The commission?s period of study will cover five years from April 2010 to March 2015.