A draft paper on Goods and Services Tax (GST) will be finalised for discussion within a month to facilitate implementation of the new tax regime by April 1, 2010, according to Chairman of the Empowered Group of State Finance Ministers Asim Dasgupta.
Speaking to reporters after a meeting of the empowered group here, Mr. Dasgupta said: “The responses of the States will be obtained and the draft will be finalised for discussion. We are trying to do that within the end of this month.”
Following finalisation of the draft, the group will hold discussions with all stakeholders, including trade and industry. For preparing the draft which is to deal with major issues such as legislation, rules and procedures for ushering in the GST, a joint working group was set up last month comprising Union Finance Ministry and State revenue officials.
On implementation of the GST regime, it would do away with most of the indirect tax levies such as the Central excise duty and service tax and subsume State levies like the value added tax (VAT) and octroi duty. At today’s meeting, the group held discussions on the proposed GST rates as also the structure of compensation for the revenue loss to the states on implementation of the new tax regime. “We discussed the calculation of revenue- neutral rates for the states and where needed, compensation and the method of compensation in a neutral manner so that the states feel adequately comfortable,” Mr. Dasgupta said.
The States, however, were not happy with the status of compensation for the revenue loss owing to reduction in the Central sales tax (CST) from four to two per cent. “This is very important because there will be such compensation requirement when we would be moving into [the] GST regime,” he said.
On the issue of compensation, Gujarat Finance Minister Saurabh Gupta pointed out that the States “condemned” the Centre’s move on not granting compensation to them for the loss they would incur due to the cut in CST during the current fiscal.
Moreover, the Centre, Mr. Dasgupta said, would also have to gear up with the States for the IT infrastructure that would be required for introduction of the new tax system.
“The preparation of IT infrastructure is absolutely essential. It is essential for tracking inter-State transaction of goods and services and tying that up with the State infrastructure,” he said.
Karnataka Home Minister V. S. Acharya noted that major decisions on such financial matters should not be taken hurriedly and stressed that all states should be protected against any revenue loss due to implementation of GST.