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Many states want two GST rates

Last Updated: Sunday, August 23, 2009 - 20:02

New Delhi: States and the Centre are yet to reach a consensus on the rate of proposed Goods and Services Tax as many states do not agree to a single rate for the new indirect tax, as suggested by the Union government.

Consensus is still evading states and the Centre on the GST rate, sources said.

This is despite the fact that there are barely seven months left for the scheduled implementation of GST from April 1, 2010.

Sources said the Centre wants a single rate for GST, possibly eight percent, to be imposed by both the Union Government and the states, to which many states do not agree.

Many states want two rates for GST like in the present system of VAT, they said. Currently, items attract mainly 4 percent or 12.5 per cent in state-level VAT.

Similar kind of structure is demanded by many states, sources said, but refused to elaborate further.

This divergence of opinion emerged at recent meeting of Empowered Committee of state finance ministers here.

Already some states like Tamil Nadu are pressing for
deferring the timing of implementation of GST.

After the meeting, committee chairman Asim Dasgupta said
he recently went to Chennai and had "very useful" discussion
with state Finance Minister K Anbazhagan. He refused to
elaborate further.

Dasgupta said the meeting discussed in detail the nitty-
gritty of proposed GST structure relating to list of exempted
items, limit of threshold, rate structure of GST items.

He added, "We need another meeting very soon,
perhaps first week of September to conclude the process."

To a query, he said the Centre has already accepted dual
model of GST. This means that both the Centre and states would
impose separate GST on goods and services.

Implementation of GST would require constitutional
amendment as well, he said, adding that working groups of the
committee would be working on the issue.

Dasgupta said implementation of GST would lead to fall in
prices of essential items, even as many states and the Centre
would gain from it.

"Overall burden of GST on price of essential commodities
will fall. The incidence of burden of tax on the price of the
commodity will fall. We want this to fall particularly in the
case of essential goods," Dasgupta said.

If comes true, this will provide relief to the common
man, reeling under the high prices of essential commodities.

Dasgupta evaded a reply to a query whether essential
commodities would be put on the negative list or there will be
reduced rate for these items.

Bureau Report

First Published: Sunday, August 23, 2009 - 20:02

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