PM panel for single GST slab

The Prime Minister’s Economic Advisory Committee (PMEAC) has favored single slab each for goods and services or one common rate for both under the proposed goods and services tax (GST), unlike the proposal mooted by the states.

PTI – 21th Dec. 2009

The centre could follow the pattern in which there is only one rate for goods and one rate for services, or one rate which is common to both goods and services,” Prime Minister Economic Advisory Council Chairman C Rangarajan told PTI.

He added that there is an advantage in having single uniform rate. When asked whether precious metals should have separate slab as suggested by empowered committee of state finance ministers, Rangarajan said, “I think the advantage lies in having one single rate.”

A discussion paper floated by the empowered committee suggested two main rates for goods, besides a special rate for precious metals. However, for services the committee proposed just one rate. It also suggested that some goods be exempted from the proposed GST.

The committee further expected that the Centre will follow the same structure for GST as mooted by it.

However, a task force set up by the 13th Finance Commission has suggested a single GST for the Centre and the states, though the rates proposed are different for both. For the Centre, it suggested five per cent GST rate, while for the states it proposed seven per cent rate.

The Goods and Services Tax, the proposed uniform indirect tax regime, will do away with most of the prevailing indirect taxes such as excise duties and service tax levied by the Centre and the state-level taxes such as octroi, VAT and others.
Ideal situation

Tax experts believe that a single rate, as suggested by the 13th Finance Commission, would be an ideal situation but not the one to start with.

“One rate for GST is an ideal thing to do but not to start with. This could be achieved in the long-run, once the new regime is established well,” said KPMG Executive Director—Indirect Taxes Paratik Jain. Jain also pointed out that the introduction of the tax can be delayed from the scheduled deadline of April 1, 2010 to October 1, 2010, saying many work is left to be done. With lots of structural work still to be done like the Constitutional amendment, the GST Draft Bill to be tabled in Parliament and most importantly the rates to be finalised, there are voices from various quarters that the GST introduction could be delayed.

Tax compliance
Last week, Chairman of Empowered Committee of State Finance Ministers Asim Dasgupta had said GST would have four slabs and and are likely to be unveiled within 15 days

Among GST tax slabs, it would be zero for exempted items, one standard rate for majority of the goods and services and another having a moderate rate, he said.

Precious metals are likely to continue to attract one per cent. This has to be done to bring uniformity in tax compliance for the business community and to facilitate them to maintain only a single book of accounts for both state GST and Central GST tax payment, Dasgupta.

Impact of GST on retail should be examined

Financial Express- 21-12-2009

Modern trade or organised retailing is emerging as an accepted and preferred model for doing business in India as they offer increased product choice - all under one roof, enhanced shopping experience as well as value for money. Introduction of Goods and Services Tax (GST) in India is a certainty and its impact on the retail sector is equally crucial to examine. It is believed that traders, including retailers, would be one of the biggest beneficiaries of this harmonised system of taxation. Although retail sector has succeeded in evolving as an organised revenue generating sector, it still continues to be fraught with some inherent challenges posed by the current indirect tax regime.

CENVAT credit of input taxes—Inability to offset the input excise duty (on procurement of goods) and service tax (on procurement of services viz rentals, freight, advertisement, other business related services) against the output tax (possible only value added tax), leads to cascading of taxes. Given that the output VAT can be (currently) discharged only through utilizing the input VAT, the input service tax (largely on account of rentals) becomes a cost in the system. The ability to pass on this additional cost to the final consumers depends on market dynamics and therefore, may lead to reduction in margins. This issue of inability to offset the input taxes should get resolved once GST is introduced in India. This is for the reason that under GST, in the form in which it is currently contemplated, taxes on services would be available for set off against taxes on goods, (albeit cross credit between Central GST and State GST is not envisaged).

Even in case of retailers involved in provision of services, the quantum of input service tax credit (under the CENVAT credit regulations) available is unclear, since the regulation recognizes only manufactures and service providers (and not traders!). It is expected that GST would remove this anomaly since the taxable event for levy of GST would shift to 'sale of goods' from the current 'manufacture of goods', resulting in re-design of input credit regulations to include any buy-sell arrangement.

Lack of uniformity in State VAT laws - Another challenge currently faced by retail stores pertains to State VAT laws. The lack of uniformity in these laws with respect to rates of taxes, threshold limits, compliance requirements, etc lead to unnecessary compliance burden on the retailers....

PMEAC for one GST slab at central level

New Delhi: The Prime Minister’s Economic Advisory Committee (PMEAC) has favored a single slab each for goods and services or one common rate for both under the proposed goods and services tax (GST), unlike the proposal mooted by the states.

“The Centre could follow the pattern in which there is only one rate for goods and one rate for services, or one rate which is common to both goods and services,” Prime Minister’s Economic Advisory Council chairman C Rangarajan said.

He added that there is an advantage in having single uniform rate. When asked whether precious metals should have separate slab as suggested by the empowered committee of state finance ministers, Rangarajan said, “I think the advantage lies in having one single rate.”

A discussion paper floated by the empowered committee suggested two main rates for goods, besides a special rate for precious metals. However, for services the committee proposed just one rate. It also suggested that some goods be exempted from the proposed GST.

The committee further expected that the Centre will follow the same structure for GST as mooted by it. However, a task force set up by the 13th Finance Commission has suggested a single GST for the Centre and the states, though the rates proposed are different for both. For the Centre, it suggested five per cent GST rate, while for the states it proposed 7% rate.

The Goods and Services Tax, the proposed uniform indirect tax regime, will do away with most of the prevailing indirect taxes such as excise duties and service tax levied by the Centre and the state-level taxes such as octroi, VAT and others.

Tax experts believe that a single rate, as suggested by the 13th Finance Commission, would be an ideal situation but not the one to start with. “One rate for GST is an ideal thing to do but not to start with. This could be achieved in the long-run, once the new regime is established well,” said leading financial consultancy firm KPMG executive director-indirect taxes Paratik Jain.

Jain also pointed out that the introduction of the tax can be delayed from the scheduled deadline of April 1, 2010 to October 1, 2010, saying many work is left to be done. With lots of structural work still to be done like the Constitutional amendment, the GST Draft Bill to be tabled in Parliament and most importantly the rates to be finalised, there are voices from various quarters that...