GST, a tax reform that seeks to create one common market for all goods and services in India, has been long delayed due to differences between the Centre and States over its design and issue of central sales tax (CST) compensation.
On condition of anonymity, an official of Uttarakhand Government said that earlier a meeting of the empowered committee of state finance ministers was held in Bhubaneswar and both side (Union and States) had agreed to end their deadlock, in which the Union Government accepted most of the demands of the states, including those on CST and a staggered entry into the GST regime, as it did when the country moved to a VAT regime.
It also dropped the proposal to set up a dispute resolution panel and agreed to states levying rates in a narrow band rather than a single uniform rate.
To address the remaining disputes, three committees comprising Union and State Government officials were constituted. The committees are supposed to give recommendations on a revenue-neutral rate (RNR), a tax rate that will ensure that there is no loss in revenue during the transition to GST.
They also discussed on a threshold revenue limit beyond which traders will have to pay GST, the issue of dual control, and technicalities regarding how and who will levy GST on inter-state movement of goods.
The EC had deliberation on the revenue-neutral rate (RNR) and the threshold with various combinations. The National Institute of Public Finance and Policy had recommended a revenue-neutral rate of 16% (8% state GST, or SGST, and 8% central GST, or CGST) with a threshold of Rs 1.5 crore for goods and Rs 25 lakh for services.
GST will subsume most of the indirect taxes at the central and state levels such as excise duty, service tax and VAT. It will see the Centre levying a uniform CGST rate and the states being allowed to levy different SGST rates in a narrow band. On the inter-state movement of goods, integrated GST (CGST plus SGST) will be levied and collected by the Centre, with the states getting their share.