After a long to and fro between the Center and the States, it was learnt that the state governments agreed to the Center accepting a negative list of services for taxation purposes. This seems to be a one of the important milestones in ensuring that the goods and services tax (GST) is in place.

Speaking to CNBC-TV18, Dinesh Kanabar, deputy chief executive officer and chairman, tax, KPMG said, introduction of point of taxation rule and this negative list are positive steps in the right direction.

However, he feels that 2012 is an ambitious target for implementation of GST. "2012 is achievable from a financial perspective, but whether it is achievable from a political perspective is an open question," he said.
Below is the edited transcript of Kanabar's interview with Latha Venkatesh and Sonia Shenoy of CNBC-TV18. Also watch the accompanying videos.

Q: Are you happy with this agreement coming in? Does this really make the GST say achievable within 2012 itself? What is the kind of timeline you are looking at?

A: Two things have happened in the recent past. First is the point of taxation rule got introduced in July, which is very significant move. This is because it moved the taxation particularly of services from cash basis to accrual basis. Second is the recent introduction of the negative list and the consensus that is seeming to come around that. Both of those are very positive steps They are steps in the right direction, so far as introduction of GST is concerned.
We have a Standing Committee to whom the Constitutional Amendment Bill has been referred. They are yet to make up  their mind on how this will span out. If the recent events are anything to go by, we still see a lot of politics come ahead of economics and one wonders as to whether the Constitutional Amendment Bill will go through.

At the heart of this whole thing is the GST council which seems to takeaway the powers of the state to fiddle around with the implementation of GST. So, 2012 is an ambitious target, achievable from a financial perspective, but whether it is achievable from a political perspective is an open question.

Q: There is talk about a dual rate structure. There is also still disagreement amongst the states as to the exact negative list. Now one understood GST itself as a concept which will prevent this competitive taxing by states and also as something which will prevent irresponsible taxing by some states. Neither of this seems to have been achieved if we are still going to juggle around with the negative service tax and you also have a dual tax list?

A: Yes, so there are two aspects to that. If you look at the negative list there is still some way to go. There is a lack of clarity for example on taxation of reimbursement of services, on cost sharing agreements. That will happen through a debate because what we have is an invitation to the public to contribute to this whole process, which is a very welcome thing to do.

If you recollect when we introduced VAT, it got introduced in phases through the states over a period of time. I would believe that GST will go the same way.  The one thing what the government indeed is trying to achieve here is to say that can we have a degree of uniformity for which the GST Council is proposed to be set in and which will ensure that the states do not muddle around with the rates.

That is being pursued politically to mean an interference by the Center in how the states will implement it. If one has to look forward and what is the likely middle of the ground approach that will happen, it is very likely that the states will be given a degree of autonomy. I don't think it's going to be rolled out uniform across states in one go, but over a period of time we will reach there.

Q: From the government's point of view how much of a good news is this negative list, in the sense how much do you think service tax collections could increase for the government?

A: There are various estimates which are floating around. Many of those estimates, if I may dare say are in the realm of speculation. If you go back and see what is it that GST is hoping to achieve, so take for example today you have excise duty and the excise duty is levied on manufacture of goods.  Therefore there is no excise for example on the margin which a trader has. That will now get captured because you are doing taxation at a point of sell.

In that sense there are leakages along the line which will get plugged. On the other hand you also have this ability to get a credit across various taxes and sort of removal of multitude of taxes. That will provide some sort of a relief. I have heard estimates as high as 15-20%. Personally I don't think that is what likely to happen.

But, I would be very surprised if the government collections on account of indirect taxes does not go up between 5-8% as a result of introduction of GST. More important the fact that government will now have the ability to tax bulk of the transactions and prevent leakage which is happening today is a very welcome thing.

Q: What happens to the overlapping of taxes of certain components between the Centre and the States, do they get added into the negative list as well?

A; The negative list is only going to be providing the list of services which will be outside the purview of service tax. The ability of a state government or a local government to tax is a matter of negotiation between Centre and State that is a separate stage altogether that is not part of the negative list. Negative list deals with services and not with the taxes.
( Enjoy Moneycontrol.com on iPad and be prepared for a fantastic experience. Get real time stock quotes, interactive charts, market buzz, and watch CNBC-TV18, CNBC Awaaz live on your iPad. Check out the free moneycontrol app.