The roadmap to implement a countrywide goods and services tax (GST) has entered its final lap, with the Centre easing its federal stronghold to make it happen.
Finance Minister Pranab Mukherjee will seek Cabinet approval for the Constitution Amendment Bill this week that would pave the way for its introduction in Parliament next week before its monsoon session comes to an end.
The Bill, the tentative draft copy of which is with HT, has diluted the Centre’s earlier position of empowering itself with veto powers to overrule decisions, but has proposed the setting up of a Goods and Services Tax Council (GST Council) that would be headed by the Union Finance Minister.
The Union minister of state in charge of revenue and all state finance ministers will be members of the council.
“It shall be the duty of the GST council to make recommendations on taxes, cesses, surcharges levied by the Centre, states and local bodies, which shall be subsumed in the goods and services tax,” the tentative draft said.
The Empowered Group of State Finance Ministers headed by West Bengal Finance Minister Asim Dasgupta is scheduled to meet in the Capital on Wednesday to discuss the Amendment Bill before Mukherjee takes it to the Cabinet for approval.
The Centre has proposed a three-rate structure for the GST, which if adopted, can dramatically alter tax administration by giving a one-shot solution to a welter of levies such as excise, value added tax and octroi.
The government plans to introduce GST from April 1, 2011.
The peak effective rate or the average rate will be about 15 per cent.
After three years, the GST rate would settle at 16 per cent for non-essential goods and services.
In effect, the Council will be the supreme authority on deciding on rates and threshold limit of turnover below which GST shall be exempted.
State governments were opposed the proposal to give veto powers to the Centre, which later forced it remove the clause from the original Amendment Bill.
According to the Bill, the GST council will be guided by five fundamental principles while deciding on GST rates and threshold limits.
These are: development of a common national market, equal treatment of all states, harmonisation of collection GST to the destination principle, minimisation of compliance costs to the exchequer and uniformity in the list of goods and services exempt from tax.