The Finance Ministry today set up a study group to look into the possibility of a Common Tax Code (CTC) for service tax and central excise duty.

"A Study Team has been set-up by the Government, under the leadership of M K Gupta to examine the possibility of a common tax code for service tax and central excise, which could be adopted to harmonize the two legislations," a finance ministry statement said.

The study group would submit its report to the Finance Minister by September 30, 2012.

The government is in the process of coming out with a Direct Taxes Code ( DTC) with a view to replace the archaic Income Tax Act.

The study group would look at procedural simplification of the existing input tax credit scheme and suggest ways to mitigate cascading effect of taxes. It will also endeavour to make the CTC trade-friendly.

"The Study Team may also suggest any other measure that will help in reducing the cost of compliance for business or transition towards a comprehensive Goods and Services Tax (GST)," the statement said.

The new Code would be implemented under the present Constitutional scheme, it added.

The group under Gupta, who is a former vice-Chairman of the Customs and Central Excise Settlement Commission, would interact with various chambers of commerce and industry and industry associations before finalising its report.

Pointing out that Service Tax law is complex and sometimes avoidably different from Central Excise, Mukherjee said "we need to bring the two as close as possible in the light of our eventual goal of transition to GST".

The government is trying to introduce GST, which will subsume various levies like excise, service tax and states tax, like value-added tax, entry tax and purchase tax.