STEP CLOSER TO GOODS AND SERVICE TAX
central and state governments moved closer to ushering in a nationwide goods
and services tax on April 1, 2011,
that will simplify the manner in which
corporates, small enterprises and traders will be levied taxes on goods and
reform would eliminate multiple indirect taxes levied by states and the
central government, that will not only make life easier for most manufacturing
companies but also allow products and services to be priced uniformly across
the country. On Wednesday, federal and state finance ministers emerged from a
meeting saying they had narrowed differences that have delayed implementation.
States are worried over loss of revenue and are negotiating how they will be
minister Pranab Mukherjee has proposed a three-year timeline to fully
implement the GST. In the first year, there will be a dual-rate GST. The
Central GST is proposed at 6% for essential commodities and a 10% standard
rate for other goods. States are expected to impose similar levies. As a
result, the combined GST on goods will be between 12% and 20%. The tax on
services will be levied at 8% by the Centre and a similar levy by the states.
the second year, only the standard rate will be reduced to 9%, the others
remaining constant. In the third year, all the rates will be brought to a
level of 16% for both Centre and states put together.
successful implementation of the goods and service tax (GST) can give a
trillion-dollar boost to the economy, taking the total output to $2 trillion
in a short span of time.
The gain from GST will propel the country from one-trillion dollar economy to two trillion-dollar economy in a short span of time. "Well designed GST will see an increase of 2 to 2.5 per cent in the GDP."
government will also float a
special purpose vehicle (SPV) for setting up information technology (IT)
infrastructure for the proposed Goods and Services Tax (GST). The SPV, called
GST N (Network), will have the Union government, the states and a technology
partner as its stakeholders.
a presentation given to the empowered committee of state finance ministers
today, Unique Identification Authority of India (UIDAI) Chairman Nandan
Nilekani assured that IT infrastructure for GST would be ready in the next six
months, that is, by February 2011 - two months ahead of the proposed
introduction of GST.
SPV will be formed by August 10 and by December 1 it will start testing of a
tax platform interface with taxpayer software. By January 1, 2011, it will
start testing the Centre’s system with that of states. By February 1, it
will be prepared with facilitation centres for businesses which do not have
computers. The SPV will also provide assistance to states which do not have
required IT infrastructure for the GST rollout.
legislation to make constitutional amendments needs to be finalised and the
mechanism for administering the tax needs to be created. There is a hope that
the legislation will be introduced in parliament in the session that begins on