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All goods taxes may come within GST
July, 02nd 2008

States may have to opt for subsuming all taxes on goods, like purchase tax, under the unified goods and service tax (GST) regime.

The Centre, which is likely to give its report on the empowered committees recommended framework on GST in the next 15 days, is against continuing such taxes in the new regime.

Sources said continuing such taxes in the GST regime would be anomalous. It would not just be against the spirit of GST but would also lead to issues with the input credit system.

The Centre is fine-tuning its responses on the GST framework given by the empowered committee. The report is expected to be finalised in a fortnight and will be given to the committee for further discussion.

At present, purchase tax is imposed on purchases of certain commodities in some states. The Centres view is that purchase tax is levied on the same transaction that would attract Value-Added Tax (VAT).

Moreover, states can extend the tax to any item in future, undermining the whole objective of GST. States such as Punjab and Haryana had opposed subsuming of the tax citing revenue losses. The Centre, however, is of the view that GST was to replace VAT which also gave states substantial revenues and the argument of revenue loss did not hold much water.

The Centre is also opposed to having separate rate for goods and service tax as suggested by the committee in its blue print of GST. Sources said the Centre favoured the recommendations made by the joint working group in this regard as that was in line with global best practices and suited to India.

With the Centre and states not agreeing on the structure, it is unlikely that the draft would be put out soon for public response. A white paper on GST is to be put up for public comments on the lines of VAT before it is adopted for implementation.

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