In a bid to iron out differences on the implementation of a unified goods and services tax (GST) regime, the Centre is eyeing a zero-tax rate for petroleum products, but has insisted that such products be included in the new tax regime.
This would give the Centre the flexibility to bring in changes in the rates at a later stage without having to go to Parliament to get an approval.
Several states have demanded that petroleum products be kept out of the ambit of a unified GST. By imposing zero tax rate, they would effectively be not taxed.
“We have been holding talks with the states, we have also proposed to the states that petroleum products be allowed to come under the GST ambit even if the rate is nil...to save the issue to go to Parliament later,” JM Shanti Sundharam, chairperson, Central Board of Excise and Customs told HT. “There are issues but states must think of India as a whole...many states have issues but then there will be issues and it is important to overcome them.”
“Given that there is no consensus between the centre and the states, the government may need to consider a middle ground to get this passed in Parliament,” Soumya Kanti Ghosh, chief economic adviser, State Bank of India said.
The implementation of the unified GST, to replace a range of taxes levied by the Centre and the states, such as excise duty, octroi, central sales tax and value-added tax, is expected to push GDP growth by about 1.5 percentage points.
The issue of Central Sales Tax (CST) compensation has been another area of concern for the states, which have agreed to a lower payment of `34,000 crore for phasing out CST, a precondition for rollout of GST.
The Centre will bear 100% of the loss accruing to states in 2010-11 on account of lowering of CST. However, for the subsequent two financial years, the Centre will provide for 75% and 50% of the losses.
Finance minister Arun Jaitley has meanwhile said in Parliament that his government would take all steps to move the amendments to the Constitution Amendment Bill within this year to pave the way for the implementation of the crucial tax reform that has been hanging fire for several years now for want of consensus.
The Centre is keen that petroleum products and liquor come under GST, while states are against it. If they are included in GST, states would no longer be able to tax these items.