Rates for goods and services will be the same, says chief of states’ panel.
The Centre and states have agreed on a uniform dual Goods and Service Tax (GST) regime from April 2010, according to a panel of state finance ministers.
There will be two slabs for GST, but the rates will be same for goods and services, according to West Bengal Finance Minister Asim Dasgupta, the chairman of the panel. The combined GST rate is likely to be within 20 per cent.
The Empowered Committee of State Finance Ministers, which met today, also asked the Centre for Rs 20,000 crore Plan grant and more headroom to borrow from the market, saying the states’ tax revenues have been hit by the current economic slowdown.
Attempts to build consensus on a uniform GST regime had got a boost on November 28, a few days before the then finance minister P Chidambaram agreed to the committee’s proposal for a dual GST. GST will subsume central excise, service tax, state sales tax and central sales tax, with a few exceptions.
“He (Chidambaram) has agreed to the empowered committee’s suggestion for a dual GST,” said Dasgupta, adding that “there won’t be more than two slabs.”
The central GST will be levied and collected by the Centre, while the state GST will be levied and collected by states.
“States will retain the sovereign power to levy GST. We are now busy finalising the rates and are trying hard to ensure that these are few and are not different for goods and services,” he said.
As a result of the global meltdown’s impact on the economy, the growth in revenue collected by states started slackening in November, when the growth was 12 per cent, compared with 23 per cent in October this year. In April-November period, the rate declined to 19.9 per cent from 25 per cent a year ago.
The collection has been hit due to the poor performance of sectors like real estate, iron and steel, cement, petrochemicals and textiles. Confronted with this, states are rightly worried about protecting their Plan expenditure and at the same time providing the economy the stimulus to overcome the recession, according to Dasgupta.
States also sought more headroom to borrow from the market to fulfil their expenditure needs and demanded special exemption from the Fiscal Responsibility and Budget Management Act, which prescribes that a state’s fiscal deficit should be less than 3 per cent of its GDP. They sought continuation of central incentives even if they overstep their borrowing limits.
On the Centre’s move to list aviation turbine fuel as declared goods, the committee said all states were opposed to this and the Centre must discuss the issue with it before tabling a Bill in Parliament.
The states also reiterated their demand that the additional burden of the pay revision of government employees be borne by the Centre. “The government of India should bear at least half the additional burden of pay revision of states, at least for 2008-09, where relevant, and for 2009-10,” said Dasgupta.
