Raising of excise duty by 2 per cent to a level of service tax at 10 per cent in the Budget is a sign of preparing pitch for the rollout of now deferred Goods and Services Tax (GST), says the Finance Ministry.
"The big signal that comes out of this (excise hike) is the committed move to unified Goods and Services Tax. They are both at ... 10 per cent excise for manufacture, 10 per cent for services," Revenue Secretary Sunil Mitra said here.
The states and the Centre differ over the structure of the proposed GST, which will replace most of the indirect taxes at the Centre and the state levels. The new tax system was to be implemented from April 1, 2010.
Though the Centre had been exuding confidence of reaching an amicable solution with the states on the differences, it has now accepted that GST would be implemented at a later date and the next likely date for rollout is April 1, 2011.
However, the Revenue Secretary said though the rate of GST would be decided later once there is consensus among the states, the economy has at least moved on to the feature of uniformity, which the new indirect tax regime promises.
"This Budget is a signal that we are committed ... You see, it's more than just a Budget. It is actually a policy statement for the years going ahead. We are moving to a unified goods and services structure regime," he said.
On the possibility of GST rate being 10 per cent, he said it was premature to comment on it.
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"GST is essentially going to happen in consultation and consensus among 28 states. Now until we achieve that, how much it (rate) will be is difficult to predict," Mitra said.
The introduction of GST is delayed as states are asking for two main rates for goods under GST, besides a special rate for precious metals and an exemption list.
However, the Union Finance Ministry wants the single rate for both goods and services.
A task force constituted by the 13th Finance Commission has suggested a single rate for both goods and services under GST. But it gave two different rates for Central GST at 5 per cent and state GST at 7 per cent.