Central cess like education and oil cess will be kept outside the dual goods and service tax structure to be introduced from April 2010.

Besides central cess, the Empowered Committee of State Finance Ministers has also recommended to keep purchase tax and octroi, which are collected at state and local levels, outside the GST framework.

 "Ideally, cess should also be merged with GST. However, keeping in view specific needs of ministries concerned, it was decided that for the time being these levies may not be included in the GST," sources told Business Standard.

Similarly, keeping in view specific requirements of states and local bodies, it was decided for the time being that purchase tax and octroi might not be included in the GST, the sources added.

Four to five under-developed states levy purchase tax on buyers instead of sellers and they need some time before abolishing the tax. Unlike under VAT, input tax credit is not available on purchase tax paid.

Accordingly, the Committee has revised the taxes at both central and state levels that would be subsumed under the GST.

The draft road map report prepared by a joint working group was accepted by the Committee in November. The working group had suggested to include cess and surcharges, which are levied for specific purposes on taxes at central and state levels, and had suggested to meet the specific requirement through budgetary allocation.

The draft report has recommended that if the levies are related to supply of goods and services, they should be part of the GST. If the levies are in the nature of 'user charges' and 'royalty' for use of minerals, then they should be kept out of the purview of the proposed tax.

The report has also recommended keeping stamp duty, which is a good source of revenue for states, out of the purview of the GST. Stamp duty is levied on transfer of assets like houses and land.

It has also suggested to keep levies like the toll tax, environment tax and road tax outside the GST ambit, as these are user charges.

modified draft GST road map, with central and state GST rates, will be submitted to the central government in January for consideration.

Central taxes to be subsumed under GST

• Central excise duty
• Additional excise duty
• Service tax
• Additional Customs duty (popularly known as countervailing duty)
• Surcharges

State taxes to be subsumed under GST

• Value added tax or sales tax
• Entertainment tax (unless it is levied by local bodies)
• Luxury tax
• Taxes on lottery, betting and gambling
• State cess and surcharges if they relate to supply of goods and services
• Entry tax in lieu of Octroi