Recognising it was unlikely the Goods and Services Tax (GST) would be rolled out from April 1 2013, the Vijay Kelkar panel suggested at the very least, the government pass the Constitution amendment Bill in the winter session of Parliament. “The roll-out of GST from April 1, 2013, does not appear to be feasible,” the Kelkar committee stated. The panel said the government should reform services and excise duties for their smooth integration into the GST regime and suggested a cut in the standard excise duty rate from 12 per cent to eight per cent to align it with the GST rate and send a signal the government was committed to the new indirect tax regime.
It also sought the list of goods for which the excise duty was six per cent or less to be restricted to merit goods, and recommended narrowing the negative list of services. “The passage of the pending Constitution amendment relating to introduction of GST in the winter session of Parliament would send a very strong signal to trade and industry about the government’s serious intent to move forward on this issue,” it said.
Analysts said at a time when the government and the Opposition were on a collision course on the alleged coal block allocation scam, foreign direct investment in the retail sector and fuel price revisions, it remained to be seen how the Bill would muster the support of two-thirds of both Houses of Parliament. Besides, the Bill also has to be ratified by at least half of the states. The parliamentary standing committee on finance is yet to give its recommendations on the report. After it does so, a revised Bill has to be framed to be tabled in Parliament. After the Constitution amendment Bill, the Centre and states would have to get their GST Bills passed in Parliament, as well as their respective Assemblies.
The Kelkar panel also recommended the list of commodities liable to tax at rates lower than six per cent be reviewed.
The government has introduced a negative list for the purpose of service tax this financial year. The Kelkar panel has suggested the government prune this list, as there is no case for exempting categories like non-profit organisations. Also, exempting infrastructure projects from service tax implied the tax on inputs was embedded into the infrastructure costs, resulting in higher project costs.
The panel said in case exemption from excise duty and service tax was justified, the supplier of goods and services should have the option to opt for the system. It also sought a ‘VATable’ system of excise duty and service tax to detect tax evasion.
