Govt unveils draft of dual-structure GST

The government on November 10 released a discussion paper on the proposed, dual-structure goods and sales tax (GST) that will be put up for discussion.

The GST is a new comprehensive tax that - when implemented - will subsume the central excise, additional excise and services tax apart from value-added tax (VAT) and entertainment and luxury taxes at the state level. The GST is expected to have different rates at the state and central level.

Speaking at the release of the draft paper, West Bengal Finance Minister Asim Dasgupta, also the Chairman of the Empowered Committee of the State Finance Ministers that is involved with the conceptualisation of the tax, said GST would not cover alcohol products though tobacco products would be charged.

Crude oil, petrol and diesel products would also be kept out of the GST's ambit, Dasgupta said, while a decision whether to levy GST on natural gas would be taken later.

GST players would get a PAN-linked identification number and the state GST would be levied on over Rs 10 lakh turnover, the minister said, adding that the centre CST would be levied on over a turnover of Rs 1.5 crore.

The government, however, decided to not impose the GST on exports though the tax would be levied on imports.

"There would be no levy on special economic zones," Dasgupta said. The GST panel said the tax rates would be decided later.

"The GST would redistribute the taxation burden equitably," said Finance Minister Pranab Mukherjee, soon after the release of the white paper. "It would minimize exemptions, broaden tax base, help increase exports and cut prices.

Dasgupta, however, did not comment whether the ambitious project, first talked about by Mukherjee in this year's budget, would meet its tight deadline of April 1, 2010. The FM too was non-committal on whether the deadline would be met though he has, in the past, admitted that meeting the deadline would be difficult.

Many states have not yet committed to joining the GST - another factor that could delay the GST rollout - and the government handed out an incentive in the form of compensation for states due to any losses that arise from the tax's implementation. The GST panel said the 13^th Finance Commission would decide on the compensation that would be handed out over a period of five years.

To view the GST announcement press conference and the CNBC-TV18 analysis, please watch the videos.