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Consensus on twin GST rates for states

New Delhi, Sept. 16: The goods and services tax (GST), slated to be introduced in states from April 1, 2010, will have a dual structure — a standard rate and a lower rate for essential commodities.

“We have reached a consensus as far as state GST is concerned. There will be two rates, one standard rate and the other a lower rate for essential commodities,” said Bengal finance minister Asim Dasgupta, who is the chairman of the value-added tax panel.

Speaking to reporters after the meeting of the empowered group of state finance ministers and officials of the Union finance ministry, Dasgupta said, “There will be a special GST rate for a small list of precious metals and there will be a list of exempted items.”

The implementation of the GST — tipped to be one of the biggest tax reforms in India that might help the country earn as much as $15 billion a year — is expected to play a key role in putting the economy back on the 9-per-cent growth trajectory.

It is not known whether the Centre will also have dual GST rates, but Dasgupta says there is likely to be a “good deal of conformity” between the Centre and state rates.

The empowered group also decided to set up a joint working group to decide on a framework for constitutional amendment to introduce the GST and a model legislation for the same. The group will have officials from the finance and other Union ministries, and finance secretaries or commissioners of commercial taxes from states, Dasgupta said.

In his budget speech, finance minister Pranab Mukherjee had reiterated the government’s commitment to introducing the GST — which will replace all major central and state taxes — by April 2010 and if required, in phases.

The GST attempts to economically integrate all states. At present, states have the power to independently levy indirect taxes on some goods. Currently, the Cenvat rate is 8 per cent, service tax rate 10 per cent and the value-added tax rate 12.5 per cent.

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