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GST structure, rates to be finalised today
January, 21st 2009

A key panel of state finance ministers will meet tomorrow in New Delhi to finalise the goods and service tax (GST) structure and rates under the dual GST regime, beginning April 2010.

The Empowered Committee of State Finance Ministers will discuss the suggestions put forward by the committee of state finance secretaries and tax commissioners which met here today.

The Centre and states have agreed that both will tax all goods and services under the dual GST model, which will have a state GST rate and a central GST rate. The Constitution will be amended to enable states to tax services.

The revenue-neutral rates will be determined after estimating the revenue loss to states in implementing the GST and their additional income from taxing services.

While the tax rates will be the same for goods and services, there could be two slabs both in central and state set-ups. It means there could be one standard rate for general category of goods and services and a lower rate for goods and services (like medicines) which have social importance.

The combined GST rate (state and central) will be around 20 per cent. It is likely that the standard central GST rate could be 11-12 per cent, while the state GST rate could be 8-9 per cent, sources said.

The combined GST rate under the lower slab could be in the range of 6-8 per cent. GST will subsume central excise, service tax, state sales tax and central sales tax with a few exceptions. The basket of petroleum products will be kept outside the GST regime for the time being and a final call on it will be taken later.

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