Decks have been cleared for the roll out of the goods and services tax (GST) regime from 10. The Planning Commission has also broadly endorsed the finance ministrys view in the approach paper to the 11th Plan document.
The commission has gone by the suggestion made by the committee appointed by the finance ministry to work out a roadmap for the GST regime. With the Plan Panel going by the finance ministrys recommendation with regard to the rollout, the issue may now be added to the reference of the empowered committee of state finance ministers, which is working on the implementation of VAT across the country to replace sales tax. The committee will be expected to work out the modalities of introducing the tax.
GST has been flagged off in Budget 06 as the next big tax rationalistion measure in indirect tax after the introduction of state-wide VAT. GST will mean that all states and Centre will have a uniform rate of goods tax and a similar rate for services tax. The idea is to ensure a clearly spelt-out tax regime in the country for trade and industry.
The tax was proposed by the Kelkar Committee to reform the tax structure in the country. It is expected that GST will substantially reduce the incidence of indirect tax on goods and services from the current 28-30 % to about 24%. But, as the economy is moving on a high growth path, this will ensure a larger volume of tax receipts than now.
The GST roadmap is linked to the successful implementation of the time line for the Fiscal Responsibility and Budget Management Act and the phaseout of the central sales tax before 10.
On Wednesday, Prime Minister said that the expenditure commitments cannot undermine the FRBM roadmap, which is expected to be achieved by the end of fiscal 08-09. States have currently introduced differential value-added tax rates which has emerged as a big issue.