The GST Council, which began 2-day deliberations in the capital, has finalised a 4-tier tax structure with some tinkering of the Centre’s proposal.
Arun Jaitley announced that four-tier GST rate structure of 5, 12, 18, 28% has been decided. Union Finance Minister said zero-tax rate to apply to 50% of items in CPI basket, including foodgrains used by common man. 5% duty will be levied on items of mass consumption used by common people; 2 standard rates of 12 and 18 % will be there in GST. Arun Jaitley said, ” Considering the inflation impact of having one standard rate, there’ll be 2 standard rates of 12% and 18%”.
Items taxed at 30-31% (excise plus VAT) will be taxed at 28%, clarified Arun Jaitley. Additional revenue from highest tax slab to be used to keep essential use items at 5 pc and transfering common use items to 18%, said Jaitley. Arun Jaitley expressed confidence that the GST deadline will be achieved.
Arun Jaitley also made it clear that aerated drinks,Pan masala,luxury cars,tobacco products to be taxed higher than 28%. They will be levied with a cess which along with the clean energy cess would be used to provide compensation to the ‘producing states’. Union FM said that the compensation package will be given for a time period of five years and a whooping Rs 50,000 crore will be needed in the first year itself to mitigate the loss states will face owing to loss of revenue.
The meeting was held to sort out the issues concerning tax rate to enable Parliament to approve the Central GST (CGST) and Integrated GST (IGST) legislations in the Winter Session beginning November 16 and pave the way for rollout of the new indirect tax regime from April 1 next year.
On the issue of dual control or cross empowerment, it is likely that there would be a generic line in the CGST Bill regarding jurisdiction of centre and states on taxes. The final touches would be given by GST Council.