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PM panel for one GST slab at central level
December, 21st 2009

The Prime Ministers Economic Advisory Council, or PMEAC, has favoured a single slab each for goods and services or one common rate for both under the proposed goods and services tax (GST), unlike the proposal mooted by the states.

The Centre could follow the pattern in which there is only one rate for goods and one rate for services, or one rate which is common to both goods and services, PMEAC Chairman C Rangarajan said.

He added that there was an advantage in having a single uniform rate. When asked whether precious metals should have separate slab as suggested by the empowered committee of state finance ministers, Rangarajan said: I think the advantage lies in having one single rate.

A discussion paper floated by the empowered committee suggested two main rates for goods, besides a special rate for precious metals. However, for services, the committee proposed just one rate. It also suggested that some goods be exempted from the proposed GST.

The committee further expected that the Centre would follow the same structure for GST as mooted by it. However, a task force, set up by the 13th Finance Commission, has suggested a single GST for the Centre and the states, though the rates proposed are different for both. For the Centre, it suggested a 5 per cent GST rate, while for the states, it proposed a 7 per cent rate.

GST, the proposed uniform indirect tax regime, will do away with most of the prevailing indirect taxes such as excise duties and service tax levied by the Centre and the state-level taxes such as octroi, value added tax (VAT) and others.

Tax experts believe that a single rate, as suggested by the 13th Finance Commission, would be an ideal situation but not the one to start with. One rate for GST is an ideal thing to do but not to start with. This could be achieved in the long run, once the new regime is established well, said Paratik Jain, executive director (indirect taxes) of KPMG, a financial consultancy firm.

Jain also pointed out that the rollout of the tax could be delayed from the scheduled deadline of April 1, 2010, to October 1, 2010, saying many work was left to be done. With lots of structural work still to be done like the Constitutional amendment, the GST Draft Bill to be tabled in Parliament, and most importantly, the rates to be finalised, there are voices from various quarters that the GST rollout could be delayed.

Last week, Asim Dasgupta, chairman of the Empowered Committee of State Finance Ministers, had said GST would have four slabs and were likely to be unveiled within 15 days.

Among the GST tax slabs, it would be zero for exempted items, one standard rate for majority of the goods and services and another having a moderate rate, he said.

 
 
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