Agreement on major GST issues still elusive: PWC

Last Updated: Monday, November 2, 2009 - 20:42

New Delhi: Amid fears that GST implementation will miss the deadline, a leading consultancy firm PwC has said the Centre and states are yet to reach an agreement on major issues relating to the new tax regime.

"Agreement is yet to be reached on major issues such as
the treatment of inter-state supplies of goods and services,
imposition of GST on imports," said a PiceWaterHouseCoopers

The Goods and Services Tax is scheduled to be introduced
from April 1, 2010. However, Finance Minister Pranab Mukherjee
had recently said while the Centre and the states were serious
over introducing the system as per schedule, he would not be
surprised if there was slippage of a few months.

At present, Central Sales Tax (CST) of two per cent is
imposed on inter-state movement of goods, but the proposed GST
is expected to subsume CST. As such, there has to be an
agreement as to how inter-state movement of goods will be
taxed under the new regime.

While GST is not expected to replace customs duty,
sources said it may subsume other taxes such as countervailing
duty (CVD) on imported goods. But, it is yet to be decided as
to how these existing taxes would be subsumed.

Besides, PWC said an agreement was yet to be arrived at
regarding exemptions under Centre and State GSTs, and
standardisation of procedures for implementation of new tax

Some states such as Madhya Pradesh and Gujarat had
already said that GST introduction should not be hastened just
to meet the deadline.

PWC said certain issues have to be addressed before GST
is introduced.

These issues include safeguarding the interests of less
developed states, ensuring that GST is positive for
corporates, compensation for states for phasing out CST and
introducing GST, the consultancy firm said.

Besides, the Constitution is also required to be amended
to enable the Centre to tax beyond manufacturing stage and the
state governments to tax services, the newsletter said.

The Empowered Committee of state finance ministers have
already constituted a working group to suggest constitutional
amendments and model GST Act.

GST would be most ambitious indirect tax reforms in the
country after state-level VAT. It would subsume most indirect
taxes like excise duty and service tax at the Centre, VAT at
the level of states, besides local levies like Octroi and
purchase tax.

PWC said taxes like stamp duty, toll tax, passenger tax
and road tax will not be subsumed into GST.

States have already decided to have two main rates of
GST, besides a special rate for precious metals. However, the
Centre is yet to take a call on the number of rates that it
will have.

The exact rates and the number of goods and services to
be included in GST have also not been decided yet.

Bureau Report

First Published: Monday, November 2, 2009 - 20:42

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