The government is likely to announce a roadmap for migrating to a countrywide goods and services tax (GST) in the 2011-12 budget.
The government has been targeting to rollout GST from October 1, 2011 although contentious issues remain to be ironed out, especially the tax rates. This may push the rollout deadline to April 1, 2012.
GST is India’s most ambitious indirect tax reform plan, which aims to stitch together a common market by dismantling fiscal barriers between states. At present, states and the Centre tax goods independently.
If adopted, GST can dramatically alter tax administration by giving a one-shot solution to a welter of levies such as excise, value added tax and octroi.
However, its implementation has faced political hurdles as state governments stand to lose their discretionary fiscal power.
An official said the Centre is working at a “political level” with states for countrywide rollout of GST, but it may take some time to arrive at a consensus on the new indirect tax regime.
The Centre has proposed a three-tier GST structure.
As per the proposal, GST will be levied at two rates on goods — a concessional 6 % on essential items and 10% for others; services will attract 8% GST. These will be collected by the Centre and the states equally.
The original deadline for the rollout of GST was April 1, 2010. It now seems a new deadline of April 1, 2012 is likely to be set.
The main opposition Bharatiya Janata Party, whose support is crucial for the GST regime, has slammed the UPA government for its plan to introduce a GST constitutional amendment bill in Parliament during the budget session, without bringing the states on board.