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Rate has to be discussed further, says India
December, 17th 2009

India Inc as well as tax experts have expressed apprehension whether the government would accept the 12% GST rate recommended by the task force of the 13th Finance Commission. While broadly welcoming the recommendations, they have suggested further detailed discussions on the subject as different industrial sectors would have different views.

Industry chamber Federation of Indian Chambers of Commerce and Industry (Ficci) said while the suggestions are welcome, the exact rate has to be discussed further because various industries will have different positions necessitating further discussions.

According to DS Rawat, secretary general, Assocham, GST recommendation at rate of 12% will do a balancing act and the government should accept the single rate of GST at rate of 12%. If possible there should be one GST but initially the government will have to roll out two rates of GST for which consultation process should be taken to logical conclusion.

Pratik Jain, executive director, KPMG said, The recommendations of the Finance Commission is to have moderate tax rate with a larger tax base, with limited exemptions. While the recommendations would simplify the tax system, this may not find acceptance by the state governments. Perhaps, this should be an objective which needs to be achieved over a period of time.

Economist Pai Panandikar said it is a fairly reasonable rate. The division5% and 7% between the Centre and states seems to be pretty reasonable. The direct tax revenue is growing fairly well and indirect tax/sales tax have not been increasing as much, partly because the central excise duty was 16% and VAT system has not worked well.

According to accounting regulator, Institute of Chartered Accountants of India, this is the beginning of the intention of the government to introduce GST. Amarjit Chopra, vice-president, ICAI said, The GST coming in India is itself a good sign from the government and it will promote economic activity in the country. Its a good decision as the revenues had not been increasing.

S Madhavan, leader of indirect tax practice, PwC said, There are two critical assumptionsone is complete broad basing of tax and other is a single rate. It is unlikely that it will be accepted in the present form.

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