GST Council discusses 4-slab rate structure

Arun Jaitley, the Union finance minister, said at the media briefing that at least 5 options on rate structure have been presented to the Council. He added that the rate structure needs to be decided in such a way that it refrains from causing revenue losses to the country as well as inflationary pressures in the economy.

The Centre has put forward a proposition to the GST Council of 2 standard rates of 12 per cent and 18 per cent for various taxable goods. If approved by the Council, a majority of the services will be taxed at 18 per cent, while the goods with abatement are likely to be taxed at the rate of 12 per cent.

The proposal also includes a threshold rate of 6 per cent, a rate of 4 per cent for precious metals and a 26 per cent rate on luxury items and tobacco products. The Centre said that a cess can be levied on sin goods in order to gather fund for the compensation that needs to be paid to the states for the losses they will incur due to the transition to GST.

According to the estimates of the Centre, a total compensation of around Rs 50,000 crore will need to be paid to the states in the first year. Close to Rs 26,000 crore will be sourced from the clean environment cess, while the rest will be collected from cess on demerit goods like luxury cars, pan masala, tobacoo products and aerated drinks.

Speaking about the cess on demerit goods, revenue secretary Hasmukh Adhia said that as per the Centre's proposal to the Council, it will vary and will be levied in addition to the 26 per cent GST rate.

The Centre is keen on rolling out GST by April 1, 2017. (KD)

Fibre2Fashion News Desk – India