Formal GST proposal to be moved in next Cabinet: Finance Ministry

NEW DELHI: The finance ministry will move a formal proposal seeking Cabinet endorsement for the constitutional amendment bill to facilitate the goods and services tax (GST)after securing support from the states. The government is rushing the bill through so that it can be introduced in the ongoing winter session of Parliament that ends on December 24. The finance ministry is giving finishing touches to the draft bill that will go to Cabinet.

The Centre and the states reached a near consensus on the bill following finance minister Arun Jaitley’s assurance to states on compensation for revenue losses. The Centre has agreed to zerorate petroleum for three years under GST and to compensate states for any revenue loss on account of subsuming entry taxes.

This will mean that although petroleum will be included in GST to start with, it will be taxed at zero percent, allowing states to tax it for three years. After three years, petroleum goods will be taxed through GST.

GST seeks to replace a vast array of central and state taxes on goods and services with a single levy. Jaitley has also assured states that the Centre will provide compensation for losses accruing from a cut in the central sales tax rate to 2 per cent from 4 per cent–about Rs 11,000 crore for 2009-10 in the current financial year and for 2010-11 in the budget.

A key demand of Indian industry, GST will lower the tax component embedded in the cost of an
item by removing taxes on taxes though an efficient passthrough mechanism for levies paid on inputs. It will thus eliminate the cascading effect of multiple layers of taxation all over the country, thereby bringing down prices.Initially proposed to be implemented from 1 April, 2010, GST has been delayed due to a lack of consensus between the Centre and the states. The Narendra Modi government is now looking to roll it out on April 1, 2016.

Source:Economictimes