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Central GST at 11%,state tax at 13%,says sub-panel

* Technical groups say that the total effective rate at 24% is justified

Written by Shruti Srivastava | New Delhi | Published: April 25, 2013 1:47:24 am

The rates of Goods and Services Tax (GST) will be a median 11 per cent for the Centre and 13 per cent by the states,according to a sub-committee of states and Central government officials working on the subject.

There will be some variations in the rates for merit and de-merit goods,but an official connected with the exercise said the combined rate will be 24 per cent,almost unchanged from the current rates to ensure revenue neutrality.

For traders with turnover of over Rs 1.5 crore the Centre will collect the taxes while for those between Rs 25 lakh and Rs 1.5 crore it is the states which will collect the tax. The current threshold for excise duty is annual turnover of Rs 1.5 crore and for service tax it is Rs 10 lakh.

These decisions by the technical groups set up by the empowered committee of state finance ministers will now be examined by each state. The groups which have officials from both the sides are expected to give their report in May. The revenue-neutral rate (RNR) suggested by the committee is very high when compared to earlier suggestions made by Vijay Kelkar committee or the finance ministry.

According to the Thirteenth Finance Commission chaired by Kelkar,the rate for both was set at 6 per cent — a grand bargain as Kelkar puts it. He also suggested an exemption threshold of Rs 31 lakh crore. A finance ministry panel suggested instead 6 per cent for states,a Central standard rate of 10 per cent,and for goods and services at 8 per cent.

However,the technical groups in their reports have argued that keeping the several exemptions including on alcohol and petrol from the ambit of the GST,the total effective rate at 24 per cent is justified.

“Keeping several items out due to revenue and political consideration has led to such a high effective rate. However,going forward if the states agree to put some of these items under the GST,the RNR would come down,benefiting traders,” a government source said. At such a high rate,experts said that the evasion of tax and non-compliance would shoot up,and will not lead to any increase in tax collection as expected.

The empowered committee is scheduled to meet on May 10-11 in Mussoorie to take forward the discussion on the implementation of the new indirect tax regime and discuss the report of the three technical committees which were tasked with working out RNR,the issue of dual control,threshold for GST and exemptions,respectively.

The technical committees,though,have discussed a floor rate between 8-10 per cent for standard goods and a lower rate for merit goods,it is yet to be finalised,the source added. Earlier,in January,the states had reached a broad consensus on GST design with the Centre agreeing to do away with the proposed disputes settlement authority.

Navin Kumar to head GSTN SPV

New DelhI: The finance ministry has appointed Navin Kumar,a 1975-batch IAS officer and former chief secretary of Bihar,as the chairperson of the proposed Goods and Services Tax Network (GSTN) special purpose vehicle,official sources told The Indian Express.

Kumar has been selected from a pool of six people who were short-listed by the selection committee chaired by finance minister P Chidambaram,and comprising Sushil Modi,chairperson,empowered committee,and UIDAI chief Nandan Nilekani. The post is for three years. ENS

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