The Centre earlier this week proposed three different rates -- 20 per cent for goods, 16 per cent

for services and 12 per cent for essential items -- under GST. "Reform of tax structure and tax administration isanother important step in resource mobilisation. The GST is especially important in this context and I would urge Chief Ministers to give full support to the effort to implement GST with effect from April 1, 2011," Singh said at the National Development Council (NDC). The GST would replace excise and service tax at the central level and VAT at the statelevel. The PM's statement comes at a time when doubts have been voiced by many NDA-ruled states over the implementation of the GST from April one, 2011. The introduction of new indirect tax regime has already been delayed by a year due to differences among the states and the Centre. Most chief ministers were present at the NDC meeting called to review the progress of the 11th five-year Plan. The introduction of GST would need constitutional amendments, which is required to be passed with two-thirds majority in both houses of Parliament, and ratification through a simple majority by at least half of the state assemblies. As such, the support of chief ministers is crucial for radical reforms. If all members of Parliament vote in the Constitutional amendments bill, 362 members of the Lok Sabha and 161 MPs of Rajya Sabha will have to vote in favour of the bill to pass it. Therefore, the support of the main opposition BJP is required for the passage of the Bill in Parliament. Earlier this week, Finance Minister Pranab Mukherjee had reminded the BJP that its election manifesto during last Lok Sabha elections had promised to implement GST, if the NDA comes to power. The Centre expects to table Constitutional amendments bill in Parliament in the monsoon session that begins Monday. However, the draft of the bill prepared by the Centre is still being studied by states and they will meet on August 4 to discuss the issue. Mukherjee had said that introduction of the GST would help double the size of India's economy to USD 2 trillion in a short span of time.

He had also assured the states that he is willing to go beyond the 13th Finance Commission's recommendations of Rs 50,000 crore compensation to states.

Finance Minister Pranab Mukherjee has said that the successful implementation of the
Goods and Services Tax (GST) can give a trillion-dollar boost to the economy, taking the total output to $2 trillion. "The gain from GST will propel the country from $1-trillion economy to $2-trillion economy in a short span of time," he said while addressing a meeting of the industry chamber Ficci. Mukherjee, who had proposed a three-tier structure for the new indirect tax regime on Wednesday, quoting NCAER estimates said, "Well-designed GST will see an increase of 2 to 2.5 per cent in the GDP." GST will subsume all the indirect levies like excise, VAT, local taxes, et cetera.

GST was proposed to implement on April 2010, but due to some arguments between state and central Government with regards to revenue loss and compensation to the state government, the implementation is postponed to April 2011, but this time Central government is keen to implement GST. Honorable finance minister Pranab Mukarji ensured the compensation to state due to revenue reduction on implementing GST. Yesterday finance minister announced a three year road map. The tax will be collected in three tiers rates. 1. Goods at lower rate 2. Goods at standard rate 3. Services. During the first and second year GST on goods will charged in two rates. i.e. Goods at lower rate for necessary items and goods of basic importance ,Goods at standard rate for goods in general. Rates of GST on service will remain same from the beginning

Year 2011 April

Categories Goods at lower rate Goods at standard rate Services Goods at lower rate Goods at standard rate Services

2012 April

Central GST 6 10 8 6 9 8

State GST Total Tax Liability 6 12 10 20 8 16 6 12 9 18 8 16

And from third year i.e. April 2013, if everything is going according to planning, and there is not much Burdon of compensation (to state govt) on central government the tax rate will be reduced and there will be only two rates for Goods and services. 1. Goods at standard rate 2. Services Year 2013 April Categories Goods at standard rate Services Central GST 8 8 State GST Total Tax Liability 8 16 8 16

In GST taxable events are supply of Goods and supply of services, any economic events which is not supply of goods is considered as supply of services. a service provider or trader has to collect tax in two element called CGST( For cental government) SGST ( for state government) and paid separately.

Threshold limit for GST

The exemption limit of GST has been proposed to 10 Lakh Both for services and Goods. So any business with a turnover below 10 lakh will be exempted from levying GST. Current threshold for excise duty is 1.5 crore, so more manufacturers liable for GST this will help to compensate state government lose to an extent.

Cost increase for Services

Definitely there is a price hike for services as the present service tax rate 10.3 go up to 16

Exempted Goods
All the exempted goods under VAT remain exempted under GST also.

Roadmap to GST As we have parallel systems of indirect taxation at the central and state levels, each of the systems needs to be reformed to eventually harmonise them. The central excise duty should be converted into a full fledged manufacturing stage VAT on goods and services and the states sales tax systems should be transformed into a retail stage destination based VAT, before the two are integrated. At the central level, beginning has been made by converging widely varying tax rates and extending input tax credit to convert excise duties into a CENVAT

Our request to the states will be to consider keeping the same rates - lower rate for state goods and services tax (SGST) at 6%, standard rate at 10% and services at 8%. This mutually supportive approach will ensure that we have a single rate for CGST and SGST in the range of 12-20% in the first year of GST introduction, Mukherjee said in a statement. He added that the peak effective rate will be about 15%, which will be quite acceptable to trade and industry. Eventually, it will settle down to a level of 16-18% for both CGST and SGST, which will mean an effective rate of 12%.