New Delhi: The centre hopes to win the support of states on the fundamentals of the new Goods and Services Tax or GST - including its main rate - at a three-day session that ends tomorrow.
The decision-making body of the GST Council, which consists of Finance Minister Arun Jaitley and his counterpart from each state, has to decide the rate of tax, which must then be approved by parliament.
The GST does away with levies charged when goods cross state lines and unify India into a single market.
The centre has suggested four tax slabs with the lowest at 6 percent and the highest at 26 percent, which would apply to about a fourth of taxable items.
The slabs proposed are 6, 12, 18 and 26 per cent. Food items should be exempt to keep inflation in control, the centre has suggested. FMCG and consumer durable products would be taxed at 26 per cent, against 31 per cent currently.
For luxury goods like fancy cars, cigarettes and soft drinks, an additional cess over the 26 percent rate has been mooted.
States like Kerala want a higher tax for luxury items and a lower rate for common usage goods, which first need to be defined.
The centre has agreed to compensate states for five years for the revenue they will lose when GST subsumes their levies. The extent of compensation remains a contentious issue.
Some states have also objected to the fact that 11 lakh businesses that currently pay service tax will continue to be assessed by the centre rather than them, which they say is unfair and eats into their power. The centre says that over time, officials in states will be trained to take over.
The centre wants to reach consensus at this current meeting so that it can present the agreed-upon tax rate and scope to parliament which meets next month.
If no agreement is managed, a smaller group of Finance Ministers may be assigned to resolve differences.
The decision-making body of the GST Council, which consists of Finance Minister Arun Jaitley and his counterpart from each state, has to decide the rate of tax, which must then be approved by parliament.
The GST does away with levies charged when goods cross state lines and unify India into a single market.
The centre has suggested four tax slabs with the lowest at 6 percent and the highest at 26 percent, which would apply to about a fourth of taxable items.
The slabs proposed are 6, 12, 18 and 26 per cent. Food items should be exempt to keep inflation in control, the centre has suggested. FMCG and consumer durable products would be taxed at 26 per cent, against 31 per cent currently.
For luxury goods like fancy cars, cigarettes and soft drinks, an additional cess over the 26 percent rate has been mooted.
States like Kerala want a higher tax for luxury items and a lower rate for common usage goods, which first need to be defined.
The centre has agreed to compensate states for five years for the revenue they will lose when GST subsumes their levies. The extent of compensation remains a contentious issue.
Some states have also objected to the fact that 11 lakh businesses that currently pay service tax will continue to be assessed by the centre rather than them, which they say is unfair and eats into their power. The centre says that over time, officials in states will be trained to take over.
The centre wants to reach consensus at this current meeting so that it can present the agreed-upon tax rate and scope to parliament which meets next month.
If no agreement is managed, a smaller group of Finance Ministers may be assigned to resolve differences.