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By Manoj Kumar
NEW DELHI (Reuters) - A council of finance ministers from India's federal and state governments on Wednesday failed to finalise the main rate of the goods and services tax and will again meet next month, raising concerns that the new sales tax might miss April's deadline.
Experts say that the best taxes have to be low, flat rates and few exemptions and warn that the proposed GST for India may - due to its relative complexity - deter compliance in a country where many businesses are skilled at minimising their taxes.
"Having more rates will complicate the situation," said M.S. Mani, senior director at Deloitte Haskins & Sells LLP, adding uniform rate in states would simplify current tax structure.
At the meeting, some states sought to impose a surcharge of tax on luxury products such as sparkling water and tobacco products to keep lower rates on essential food items, Kerala Finance Minister Thomas Issac told reporters.
But the federal government did not support the proposal, saying it would have a cascading impact, a senior Finance Ministry official told reporters after the meeting.
The ministry has proposed four tax rates, with the highest at 26 percent for about 20-25 percent of taxable items. Other slabs included 12 percent for food and fast-moving consumer goods (FMCG), and 4 percent for precious metals like gold.
Finance Minister Arun Jaitley, however, remained optimistic that the November meeting would resolve the differences, paving the way for the tax's implementation from April 1.
To hit that timeline, federal and state lawmakers need to pass key bills in this calendar year, and even then there will be a race against time to set up IT systems and ensure millions of businesses are ready to file returns online.
(Reporting by Manoj Kumar; Editing by Alison Williams)
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)