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Mukherjee: Consensus on Goods and Services Tax may take time

January, 24th 2011
Finance Minister Pranab Mukherjee today said the Centre is working at a "political level" with states for countrywide roll-out of Goods and Services Tax (GST), but it may take some time to arrive at a consensus on the new indirect tax regime. "I am hopeful that it would be possible to achieve the success in bringing the consensus though it may take some time," Mukherjee told reporters here. Once implemented, GST will subsume indirect taxes like excise duty and service tax at the central level and VAT on the state front, besides other local levies. "At the political level, we are working on it (GST) to evolve the consensus in close cooperation with the Empowered Committee of State Finance Ministers ," Mukherjee said. The Centre has proposed a three-tier GST structure. As per the proposal, GST will be levied at two rates on goods -- a concessional 6 per cent on essential items and 10 per cent for others -- while services will attract 8 per cent GST. These will be collected by both the Centre and the states. The original deadline of April 1, 2010, for roll-out of GST has already been missed and the Centre has said it will make efforts to roll it out from April 1, 2011. However, due to the lack of consensus between the Centre and states on the issue, it is likely this target will also be missed. The proposal for roll-out of GST, touted as the most significant indirect tax reform since the introduction of state-level VAT, has been hanging fire on account of persisting differences between the Centre and states on the GST Constitution Amendment Bill . Amendment of the Constitution is required to enable the Centre to impose tax on activities other than manufacturing and for the states to levy service tax, under the GST regime. In a meeting of state finance ministers and Mukherjee last week, the states had asked the Centre to allow them to levy taxes on 33 services. Currently, the Centre cannot impose tax beyond manufacturing activities and states do not have the power to levy tax on services. However, after GST is implemented, both the Centre and the states will have the power to levy taxes on goods and services.