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Post date: Jan 29, 2010 8:33:42 AM
NEW DELHI: The goods and services tax (GST) crawled towards a final rate after most states zeroed in on a levy, though the comprehensive indirect tax reform still faces delays as the proposed rate tops the calculations of the central government and industry.
States such as Madhya Pradesh, Chhattisgarh , Andhra Pradesh and Gujarat, have proposed a GST rate of up to 20% that is expected to figure in finance minister Pranab Mukherjee’s slated meeting with a panel of state finance ministers on Thursday to discuss a new rollout date for the tax. But the states’ rate, which is in contrast to the 16% pegged by the Centre and industry, could hobble the introduction of the tax reform , as the Centre would share industry’s fears of a high rate slowing down recovery driven by stimulus measures.
The finalisation of the GST structure has already run into many delays due to differences between the Centre and states on crucial issues such as the turnover threshold limit, inclusion of state levies such as purchase tax and compensation for losses after its introduction. As a result, the scheduled date of April 1, 2010, looks improbable for the tax reform that aims to create a national common market by replacing indirect taxes such as excise duty, service tax and value-added tax with a single levy.
If GST is above 16%, it will derail the stimulus package and the industry’s ability to remain competitive, said R Muralidharan, ED, PricewaterhouseCoopers . Most states arrived at their GST rate after the government asked each of them to calculate a revenue-neutral rate by assuming revenues and the tax base under the current and new tax regime as the same. The revenue-neutral rate for GST would be unique for each state, depending on their prevailing taxes, taxpayer base and list of exempt items. “About 80% of states have written that their calculations indicate that a revenueneutral rate would be in the range of 18-20 %,” said a finance ministry official.
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