States want GST to replace most indirect levies

The discussion paper does not give any idea about rates & items to be included

The states released a discussion paper prepared by the Empowered Committee of their finance ministers here which said the GST should also replace cesses and surcharges at both the central and state levels.

The much-talked about discussion paper did not give any idea about rates and the items to be included in it. However, it made some specific suggestions such as alcohol and petroleum tax should be out of GST, while tobacco be included in it.

The committee would take a final view on whether natural gas would be included in the GST after further deliberations, it said. The discussion paper suggests that among central taxes, additional excise duty, additional customs duty, and special additional duty be replaced by the GST. State taxes like entertainment tax, except for the one levied by local bodies, luxury tax, taxes on lottery, entry tax except octroi are proposed to be out once the new tax regime is introduced. It proposed that exports from SEZs would not attract GST, but sales from SEZ to domestic markets will draw the tax. The paper said industrial incentives given in the form of tax exemptions would be converted into cash refund schemes.

Purchase tax issue

It also said the issue of replacing purchase tax with GST is being discussed with the Centre. After GST is introduced, Central Sales Tax, imposed on inter-state movement of goods is slated to be removed. For this purpose, it said the Centre would impose a tax, IGST, a total of state and central GSTs.

Empowered Committee Chairman Asim Dasgupta said services would, however, have only one rate. The Centre is yet to take a call on its GST rates. Before, it is implemented four bills relating to constitutional amendment, state GST, Centre GST and IGST, would have to be passed. He said draft constitutional amendment bill will be out by November 15, and other bills will be ready by month-end. Commenting on the discussion paper Bangalore Chamber of Industry and Commerce President K R Girish said “A plain reading the discussions paper indicates that it will impact Trade and Industry in the area of supply chain, finance, IT systems and process marketing, etc. At least as far as Karnataka is concerned it appears that Entry tax will continue. It would be worthwhile, if the Centre and the States still consider stamp duty and electricity taxes to be subsumed into the GST net. While intentions seem to be honorable, there is a clear need for a determined action plan with identified responsibilities to see the implementation.”

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