States are not in favour of subsuming all taxes into the Goods and Services Tax even after the introduction of the unified GST in 2010. It is likely that octroi, entry tax, entertainment tax and electricity duty will continue even in the new regime.
The issue was deliberated at length at the meeting of the empowered committee of state finance ministers but differences remain, a source said. States feel they would lose substantial revenues if such taxes are subsumed within GST, he said.
Certain taxes may not be subsumed immediately, empowered committee chairman Asim Dasgupta told reporters after the meeting on Thursday.
The empowered committee set up a panel to work out the rates for GST in a month. The panel would comprise state finance secretaries, commissioners of commercial taxes and concerned joint secretaries in the union finance ministry, advisor to the finance minister Parthasarthy Shome and empowered committee member-secretary Satish Chandra.
The committee was in favour of two sets of rates for goods and a single rate for services which would be levied both at the central and state level. This issue would also be examined by the panel.
Mr Dasgupta said the GST rates would be very few. The whole idea is that revenue neutral (GST) rates should not be too high, he said. The empowered committee had last month accepted the recommendation of a working group on GST to have dual GST structure one at the state level and the other at the central level.
In the dual GST model formulated, overall incidence of tax will be lower than before, yet there will be better tax compliance and would be better for consumers, Mr Dasgupta said.
Based on the recommendations of the GST rates panel, and views of state finance ministers, a model would be crystallised and subsequently, a report would be submitted to finance minister P Chidambaram.
The empowered committee would then call a meeting of chambers of commerce and industry and trade associations and work out a draft white paper on GST. This draft would be put on the website for public comments.
Proposed to be introduced from April 1, 2010, GST is intended to integrate all indirect taxes on goods and services at the state and the central level.