Amid fears that Goods and Services Tax (GST) implementation will miss the deadline, a leading consultancy firm PiceWaterHouseCoopers (PwC) has said the Centre and states are yet to reach an agreement on major issues relating to the new tax regime.
"Agreement is yet to be reached on major issues such as the treatment of inter-state supplies of goods and services, imposition of GST on imports," said a PwC report.
The GST is scheduled to be introduced from April 1, 2010. However, Finance Minister Pranab Mukherjee had recently said while the Centre and the states were serious over introducing the system as per schedule, he would not be surprised if there was slippage of a few months.
At present, Central Sales Tax (CST) of 2 per cent is imposed on inter-state movement of goods, but the proposed GST is expected to subsume CST. As such, there has to be an agreement as to how inter-state movement of goods will be taxed under the new regime.
While GST is not expected to replace customs duty, sources said it may subsume other taxes such as countervailing duty (CVD) on imported goods. But, it is yet to be decided as to how these existing taxes would be subsumed.
Besides, PwC said an agreement was yet to be arrived at regarding exemptions under Centre and State GSTs, and standardisation of procedures for implementation of new tax system.
Some states such as Madhya Pradesh and Gujarat had already said that GST introduction should not be hastened just to meet the deadline.
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PWC said certain issues have to be addressed before GST is introduced.
These issues include safeguarding the interests of less developed states, ensuring that GST is positive for corporates, compensation for states for phasing out CST and introducing GST, the consultancy firm said.
Besides, the Constitution is also required to be amended to enable the Centre to tax beyond manufacturing stage and the state governments to tax services, the newsletter said.
The Empowered Committee of state finance ministers have already constituted a working group to suggest constitutional amendments and model GST Act.
GST would be most ambitious indirect tax reforms in the country after state-level VAT. It would subsume most indirect taxes like excise duty and service tax at the Centre, VAT at the level of states, besides local levies like Octroi and purchase tax.
PwC said taxes like stamp duty, toll tax, passenger tax and road tax will not be subsumed into GST.
States have already decided to have two main rates of GST, besides a special rate for precious metals. However, the Centre is yet to take a call on the number of rates that it will have.
The exact rates and the number of goods and services to be included in GST have also not been decided yet.