New Delhi : India’s attempt to create a common market with a unified tax structure tentatively moved ahead Tuesday when the states defined an architecture for the proposed goods and services tax (GST), but the draft they released was notable more for what it left out than what it included.

It was silent on the actual tax rates, the deadline (previously set at 1 April 2010 and which definitely looks unrealistic now), and the treatment of sectors such as real estate and electricity.

The finance ministers of some states said there were tough negotiations going on between the states and also between the states and the Union government and saw the draft discussion paper released as more a way of including more people in the debate than a solution.

The country’s finance minister said as much.

“Detailed discussions with all stakeholders which will begin with the release of the documents today will help us refine the design and concepts further,” finance minister Pranab Mukherjee said in his speech on Tuesday to the state finance ministers.

GST is an effort being jointly pursued by the Centre and the states to radically transform India’s indirect tax structure. Originally, a single GST was to replace a tangled web of national, state and local taxes, and would have been the culmination of a long process of indirect tax reforms that began in 1991.

The discussion paper cleared the air on service tax. The states proposed a single category of service tax to accompany three different categories of taxes on goods. Gujarat’s finance minister Saurabh Patel has suggested the service tax rate be the same as the tax rate for the standard rate of goods, which would be the highest rate for goods.

The discussion paper was released by the empowered committee of state finance ministers jointly with Mukherjee. The discussion paper aims to collect suggestions from other stakeholders in GST such as industry, traders and consumers.

“As we go ahead, we will take stock and let you know,” Asim Dasgupta, chairman of the empowered committee told the media in response to questions about the deadline for the rollout of GST. Former finance minister P. Chidamabaram had set April 2010 as the deadline to transition to GST.

The discussion paper needs to be followed up by negotiations with the Centre, constitutional amendments and creation of information technology infrastructure, among others, before GST can be rolled out.

As of now, the Union government has formally accepted a dual GST model, one where the Union government and states separately tax each good or service. However, the Union government is yet to publicly announce its reaction to the states’ proposal to place goods in three categories and tax them at different rates. Mukherjee’s speech to state finance ministers outlined his suggestions of the broad principles of GST such as moderate rates and uniformity among states on goods and services to be excluded from GST, but did not commit to specifics.

Source : http://www.livemint.com/