Proposal for the Adoption of GST

The Indian Government on 21 July 2010 proposed a three-tier tax structure to be implemented from April 1, 2010 with an objective to evolve a consensus with States on a unified single rate structure for the Goods and Services Tax (GST) over a three-year phase. At a meeting with the Empowered Committee of State Finance Ministers, Finance Minister Pranab Mukherjee proposed the adoption of a dual rate structure for the GST at both the Central level (CGST) and at the State level (SGST). The total revenue collected would be shared equally. After the introduction of GST in April 2010, goods would attract a combined GST at the standard rate of 20 per cent, essential items at a concessional 12 per cent and services at 16 per cent. In order to make the transition smooth and painless both for the taxpayer and the administration, a phased approach for the rollout of the indirect tax regime would be adopted. It was assured to the states that they would be compensated for the revenue loss on account of the CST (Central Sales Tax) reduction in 2009-10. States were promised that the amount of compensation recommended by 13th Finance Commission would be enhanced, if need be, based on a mutually agreed formula. The states, however, are yet to give their consent.