Finally Goods and service tax combining all variety of taxes will be implemented from April 1st 2011. So what would be the impact on tax on Goods? and on service?
Finance minister Pranab Mukherjee has proposed a three year timeline to fully implement the GST.In the first year,there will be a dual rate GST.The Central GST is proposed at 6% for essential commodities and a 10% standard rate for other goods.States are expected to impose similar levies.As a result,the combined GST on goods will be between 12% and 20%.The tax on services will be levied at 8% by the Centre and a similar levy by the states.
In the second year,only the standard rate will be reduced to 9%,the others remaining constant.In the third year,all the rates will be brought to a level of 16% for both Centre and states put together.
The finance ministrys assessment is that the peak effective rate taking account of credits for taxes paid upstream will be about 15% in the first year,settling down to 12% once the full GST rollout happens.
Pranab Mukherjee has set a deadline of August 20 for states to give their final consent on the new duty structure and all other pending issues,including the proposed constitutional amendment.This is to enable him to move the GST Bill in the monsoon session of Parliament.
The empowered group of state FMs has decided to meet on August 4 in the Capital to thrash out all pending issues.Meanwhile,the empowered group and the Centre in Wednesdays meeting set a timeline to work on rolling out of the GST architecture.They have decided to create a common GST portal for both Centre and states where all taxpayers above a specified threshold,likely to be Rs 10 lakh,will directly pay tax.The existing state and central structure will be used for audit purposes and enforcement issues.
Wednesdays meeting also developed a consensus on creating a special purpose vehicle (SPV),to be called the GST Network,which would be solely responsible for running the GST Portal.The states and Centre along with a technology company will be partners in the SPV.Nandan Nilekani is the driver behind this technology initiative.
On the major contentious issues,states have agreed to subsume purchase tax in the GST while the Centre has said it will look favourably into the states request to continue the Central Sales Tax,which may be renamed as transaction tax,for another two years.The FM also said he would look into the empowered groups request to keep the threshold lower for northeastern states where the average threshold at present is between Rs 2 lakh and Rs 5 lakh.
The FM has also promised to fully compensate all states for any revenue loss on account of implementation of the GST.He said the Centre will compensate 100% for revenue loss on account of the CST reduction during 2009-10 and the balance outstanding will be released immediately.He asked the empowered group to moot a CST compensation formula for 2010-11.
The FM also proposed a threshold for compounding for small dealers at a uniform Rs 50 lakh to Rs 1 crore turnover per annum for CGST and SGST.This,he said,should result in considerable simplification for small dealers so that compliance is easy and assured.On exemptions,the FM has proposed that the 99 items now exempt from VAT under the state GST list may be exempted from both components of GST.
Source: times of india
