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India's Jaitley Switches Focus To GST

by Mary Swire,, Hong Kong

19 August 2014

With the Parliament session over in India, the Government is to take forward plans to introduce the goods and services tax (GST) by arriving at a solution with states on a compensation package, Finance Minister Arun Jaitley has said.

Jaitley said the Government would ensure that the transition to GST will be revenue neutral for states. Negotiations are ongoing to determine how to calculate revenue losses for states resulting from the repeal of the central sales tax.

He also announced that a panel had been created by the Empowered Committee to discuss place of supply rules, and confirmed that the GST Council, which will be made up of representatives from the center and states, will not detract from the policy-making powers of the states, and will be responsible for making policy recommendations only.

Soon after taking office, Jaitley met with state authorities in June to hear of the outstanding matters holding back the adoption of the tax. In his maiden budget speech on July 10, 2014, Jaitley said there must be an end to the debate on whether a Goods and Services Tax should be introduced.

He said following those meetings: "I have discussed the matter with the States both individually and collectively... The debate whether to introduce a Goods and Services Tax (GST) must now come to an end. We have discussed the issue for the past many years."

"States have been apprehensive about surrendering their taxation jurisdiction; others want to be adequately compensated."

"I do hope we are able to find a solution in the course of this year and approve the legislative scheme which enables the introduction of GST. This will streamline the tax administration, avoid harassment of the business, and result in higher revenue collection both for [the Central Government] and the States."

Implementation of a nationwide GST would introduce a simple, internationally-accepted tax regime to broaden the tax base and enable the country to lower trade tariffs. GST would replace the central sales tax, the state sales tax, entertainment tax, lottery tax, electricity duty, and value-added tax. However, negotiations on the implementation of the regime have dragged on for over a decade.

TAGS: Finance | tax | business | value added tax (VAT) | sales tax | India | budget | tariffs | goods and services tax (GST) | trade | services | Tax

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