Govt may exempt fuels, exports from proposed tax

NEW DELHI (Reuters) - The Government may exempt petroleum products and exportable goods from a proposed goods and services tax (GST), a draft report said on Tuesday, as the government tries to speed up reforms to ease the tax burden on firms.

India had set a deadline of April 2010 for introducing GST on a wide ranging products and services, but the finance minister said recently it could be delayed by a few months.

The proposed GST, which is to replace existing federal and state levies such as excise duty, service tax and value-added tax, could help lower the overall tax burden of the industry.

On Tuesday, Finance Minister Pranab Mukherjee released a discussion paper that gives the broad contours of the new tax, but gave no details of the GST rates and when it could be implemented.

The discussion paper said petroleum products such as crude, motor spirit and diesel, along with alcoholic beverages would be exempted from GST but would continue to attract sales tax and other duties levied at present.

Exports and special economic zones would be exempted from the new tax but imports would be taxed, it said.

Both the federal government and states would have two separate GST structures, and small firms with turnover of up to 1 million rupees would be exempted, it added.

The paper did not mention the rate at which GST would be levied, but many industry players have their estimates.

Pratik Jain, an executive director at KPMG said the GST rate would depend on two things -- the tax base, and the number of items that are put on the exempted list.