Centre, states finally agree on 16% GST

The long-awaited reform of India’s indirect taxes system is set to get a major fillip, with a broad consensus forming within the finance ministry on a rate of 16% for the proposed Goods and Services Tax (GST) for both Centre and states combined. To be levied on all companies and traders with an annual turnover of Rs 10 lakh and above, this would provide a tax base of 40-45 lakh assessees and ensure that neither the Centre nor the states suffer any revenue loss. Sources said the rates for both the Centre and the states on GST could be 8% each, or the states could get a percentage point more depending on the final negotiations with the empowered committee of state finance ministers after presentation of the Union Budget. However, there is no scope for taking the central government’s threshold limit of annual turnover to Rs 1.5 crore as demanded by the states. The introduction of GST will streamline the movement of goods across India with a single tax structure replacing the current multiple tax system, which includes central excise, state VAT and service tax — the sum of which runs to as high as 30% .
Current multiple-tax system to be replaced by single GST, which should reduce costs for producers and consumers Centre in favour of 16% GST rate. To make it revenue-neutral, moots uniform threshold limit of Rs 10 lakh annual turnover, both for Cente and states .
Alcohol, tobacco to be taxed by Centre and states in addition to GST .
Exemption list to be pruned to 50 and will be common .
GST to be imposed only once on a product