Dr. Sanjiv Agarwal
While the country’s economic growth for 2011-12 has been
revised downwards to 6.2% from 6.5%, Reserve Bank of India has also now cut the GDP growth estimate
for 2012-13 to a low of 5.5%. The coming budget offers yet another opportunity
to provide a dynamic momentum, a clear policy vision approach and a commitment
to take the nation ahead. Only time will
tell us how much and how far it can be explored.
On Goods
and Service Tax (GST) front, there is a news to cheer about. The
Empowered Committee of State Finance Ministers which met for two days on 28-29 January,
2012 cleared the major hurdles in introduction of GST. However, we are not still
sure as to whether it could come in 2014 or even later. Now the onus is on the
Parliament to quickly clear the Constitutional Amendment Bill, 2011 which is now
almost two years old.
The Centre and the states last week crossed one
major hurdle in the way of Goods & Services Tax (GST) by agreeing to a compensation formula for the Central Sales Tax (CST).
A sub-committee of the Centre and
states recommended 100 per cent compensation to states for a cut in CST from
four per cent to two per cent for 2010-11, 75 per cent for 2011-12 and 50 per
cent for 2012-13, respectively and as a result, Centre will now have pay Rs
34,000 as CST arrears to states.
Budget 2013 : What may be in store in our view
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By nature, CST is in contrast with GST since the
former is imposed on inter-state movement of goods while the latter creates the
common Indian market. So, CST is expected to be out of the system, once GST
comes. A provision for the compensation is likely to be made in the upcoming
Budget.
The Central Government has now agreed to make
changes to the Constitution
Amendment Bill for GST. In a deviation from its earlier stand, it gave
consent to a phased roll-out of GST like the Value Added Tax (VAT). This means
that only willing states could embrace the new indirect tax system from the
beginning.
States will have the flexibility to opt out of
GS. Instead of its earlier proposal for a uniform GST rates across the country,
the Union Government has also agreed to have a floor rate of taxation with a narrow band. Thus, GST rates could
be in a range or a band to provide flexibility to states. There is also a broad
consensus on GST design. States which don’t want GST can opt out and a provision
will be inserted in the Bill.
Thus, GST now seems to be a reality if not in
2014, it may surely be in place after the
next general election. The key lies in broad consensus, on simple tax law
and commitment of states to a tax law which will be a water shed tax reform of the century. The GST
will be a win-win proposition for all- government, trade & industry and
consumers.( Source:Tax Guru)
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