State finance ministers have asked the Centre to exclude coal from the list of proposed Goods and Services Tax (GST), so as the tax rate does not increase on such an important fuel. Besides, the empowered committee of state finance ministers has also said that opium, Indian hemp and other narcotics drugs could be kept out of GST list.

“After alcoholic liquor for human consumption, following may be added–coal, opium, Indian hemp and other narcotics drugs and narcotics but not including medicinal and toilet preparations containing these items,” empowered committee of state finance ministers said recently in a letter to union finance ministry.

Orissa government was building up a case to exclude coal from the GST list. It was talking to coal-bearing states like Jharkhand, Chhattisgarh, Madhya Pradesh for creating pressure to keep coal out of the purview of GST.

Orissa has recently said that GST on coal would have direct effect on power cost. Currently, 4 per cent VAT (value-added tax) is levied on coal. If it was to be included in the GST list, the effective rate would be 12 per cent, as both state GST and central GST would levy 6 per cent each on coal.

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The roll-out of GST, which will subsume excise duty and service tax at the central level and VAT on the state front, besides local levies, has been hanging fire, ever since it missed an initial deadline of April 1, 2010.

Subsequently, the finance ministry had fixed April 1, 2011, as the new deadline for implementation of GST, but this is also likely to be missed.

The Centre now says GST may be rolled out sometime in the next financial year.

Meanwhile, a consensus on new indirect tax system GST has eluded delaying its rollout further, as some states in contrast to the Centre’s proposal had suggested a new model for the council which will be empowered to make changes in the fresh regime.

At a meeting of the Empowered Committee of State Finance Ministers in Panjim recently, panel chairman Asim Dasgupta floated a proposal that the current committee be enlarged with Union finance minister as its chairman and one of the state finance ministers as vice-chairman for making changes in the indirect tax system.

This was in contrast to the Centre’s proposal earlier that a council chaired by the finance minister, state finance ministers as members be set up and any change in GST be effected if there is a complete consensus.

This was suggested by the Centre after its earlier proposal that the council be empowered to make changes in GST with the approval of Union finance minister and two-third of the council members was rejected by states. They feared a veto power to the Centre over their fiscal autonomy.

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