Speech made by the Finance Minister at the meeting with the Empowered Committee of State Finance on the Goods and Service Tax (GST) on 21 July 2010.

Threshold limit

  • Exemption threshold for both goods and  services under Central Goods and Service Tax (“CGST”) and State Goods and Service Tax  (“SGST”) to be INR 10 lakh
  • Threshold for small dealers under both CGST and SGST to be INR 50 lakh or INR 1 crore.

Exemptions

  • Review of the existing exemptions from Central Excise Duty to be done so that the list of goods exempt from CGST is aligned to the  goods exempt from SGST
  • 99 items currently exempt from Value Added Tax (“VAT”) to be exempt from both CGST and SGST

Rates

  • In the first year of GST implementation, lower  rate for goods to be 6% and standard rate to be 10% under CGST and SGST. Services to be charged at the rate of 8% under both CGST and SGST
  • The adoption of above rates would ensure a  single rate for CGST and SGST in the range of 12% to 20% in the first year of GST  introduction
  • During the second year of implementation of  GST, lower rate for goods to be maintained at  6% and standard rate to be reduced to 9%  under both CGST and SGST. However, such  reduction to be subject to revenue receipt of  the Centre and the States during this period
  • During the third year of GST implementation,  lower rate for goods to be increased to 8% and  the standard rate to be reduced to 8% for both  CGST and SGST. However, the CGST and  SGST rate for services to be retained at 8%
  • The implementation of above rate in a phased manner would lead to a single CGST and SGST rate for both goods and services

Compensation to States

  • Centre may increase the amount of compensation to the States on account of adoption of GST as recommended by Thirteenth Finance Commission if need arises
  • Centre to fully compensate the states for their revenue loss on account of Central Sales Tax (“CST”) reduction during the year 2009- 10 and to release the balance amount to the states immediately
  • Centre to compensate States for subsuming (into GST), purchase tax on food grains, which would be provided along with VAT compensation for the next four years

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