New Delhi: Finance Minister Pranab Mukherjee today proposed a three-tier structure for the goods and services tax — 20 and 12 per cent for goods and 16 per cent for services — which states said they would consider, raising hopes that the new indirect tax regime could meet the rollout deadline of April 2011.At a meeting with state finance ministers here today, Mukherjee proposed two slabs for goods — 20 per cent for general items and 12 per cent for essential commodities — and 16 per cent for services, with the Centre and the states sharing the revenue equally. The states will take a call on the proposal and meet again on August 4.

All central and state taxes such as excise, VAT and service tax will be rolled into GST once the new regime comes into effect.The finance minister assured the states that the government was ready to raise its compensation to them for switching over to the new regime from the Rs 50,000 crore proposed by the 13th Finance Commission.Besides, states such as Punjab and Haryana will be offered special incentives for losing out on purchase tax. Punjab and Haryana jointly get around Rs 1,000 crore annually from purchase tax.

“The compensation for subsuming purchase tax on foodgrain will be provided along with VAT compensation for the next four years,” said Mukherjee. Over a three-year period, the Centre expects the three slabs to converge to 16 per cent, with the share of the Centre and states being 8 per cent each.The state finance ministers will now discuss the rate structure and meet Mukherjee next month for a final discussion. “We are meeting on August 4 to discuss the proposed rate structures and will give a final response to the finance minister then,” said Asim Dasgupta, chairman of the empowered committee of state finance ministers.

The Centre has also handed to the states a draft of the bill on GST, which it proposes to introduce in the monsoon session of Parliament. The state finance ministers will vet the provisions in the draft bill and give their feedback to the Centre at the next meeting.The government hopes to introduce a legislation to usher in GST during the Parliament session that begins on Monday.Courtesy:The Telegraph