Scramble on to meet GST date

Scramble on to meet GST date

Discussion Paper Unveiled & Timelines Set, But Consensus Eludes Many Issues

THE empowered committee of state finance ministers on Tuesday unveiled the contours of the proposed goods and services tax (GST), confirming a two-tier rate structure but leaving many questions unanswered less than five months before the governments self-imposed deadline for its rollout.
Uncertainty continued to persist about whether the April 1, 2010, deadline for the rollout would be met and Asim Dasgupta, West Bengals finance minister and panel chairman, admitted that attempts are still on to try and resolve differences among states.
Each state has its own local problem . We have to recognise these problems . We are trying hard to understand each others position, he told ET.
Many states, including Gujarat, Madhya Pradesh and Haryana, are seeking a new timeline for the launch of a tax that is seen as key to integrating a national market presently fragmented due to multiple levies imposed by states.
Satya Poddar, tax partner at Ernst & Young, described the first discussion paper on GST as a patchwork of political compromises which is neither good economics nor good politics .
In spite of extensive deliberations over the past three years, it is silent on many important aspects of the tax structure, Mr Poddar added.
The dual GST will have two components a central GST and state GST. In line with the demand from states, each of these will have two duty slabs for goods one standard higher rate and one floor, or lower rate, while some essential items such as food items and farm goods would be exempted from the tax. However, all services will have the same tax rate the standard or higher rate of GST.
While the paper has no mention of the rates, talks hover around a standard rate of 14-16 % and floor rate of 8-10 %. The Centre and states are also yet to reach a consensus on how many items will be exempt from the tax.

Economic Times, New Delhi, 11-11-2009.