The Hindu Business Line : Centre to decide GST rate after consulting States

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New Delhi March 1 The Finance Minister, Mr P. Chidambaram, has made it clear that the Centre would decide upon the national level goods and services tax (GST) rate, but only after going through a consultative process with the States.

Asked whether the Empowered Committee of State Finance Ministers on VAT would decide the GST rate, Mr Chidambaram told Business Line: "I don't think they will decide. We will take the decision but after going through a consultative process (with the States)."

In his Budget speech on Wednesday, the Finance Minister announced that the Empowered Committee of State Finance Ministers' on VAT has agreed to work with the Centre to prepare a roadmap for introduction of GST with effect from April 1, 2010.

Asked as to why no steps were initiated in Budget 2007-08 towards converging the service tax and the Cenvat rate as part of the process towards introduction of GST, Mr Chidambaram said that "how to converge can be decided only when the GST rate is decided".

Currently, the main Cenvat rate is 16 per cent, the main VAT rates are 4 and 12.5 per cent and the service tax rate is 12 per cent. All the three - Cenvat, Service Tax and VAT - have to be converged for national level GST.

Corporate India has been making a case for expediting the process of introduction of GST. The Finance Minister told an industry gathering on Thursday that he would strive to introduce GST at the earliest. "You must remember, I have to carry 30 States with me. In a federal system, it takes time to consult States governed by different political parties and evolve consensus. Outer limit of GST is 2010. I would be happy if it gets implemented a year earlier. I will strive hard for early implementation," Mr Chidambaram told industrialists.

Meanwhile, official sources said that the Government has provided a sum of Rs 2,500 crore, for 2007-08, towards compensation to States for losses, if any, arising from the cut in CST ceiling rate from 4 to 3 per cent with effect from April 1.