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breaking news  Gst Council is considering removing the 5% rate;  Seek to move items to 3%, 8% slabs

With most states on board to raise revenue so they don’t have to rely on the Center for compensation, the GST Board at its meeting next month is likely to consider a proposal to remove the slab by 5% by moving some mass consumer goods to 3% and the remaining categories to 8%, sources said.

Currently the GST is a four tier structure of 5, 12, 18 and 28%. In addition, gold and gold jewelry are subject to a 3% tax.

Additionally, there is a list of exempt items such as unbranded and unpackaged food items that are not subject to the levy. Sources said that to increase revenue, the Council could decide to reduce the list of exempt items by moving some of the non-food items to a 3% bracket.

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Sources said discussions are underway to raise the 5% tranche to 7, 8 or 9%, a final call will be taken by the GST Council which includes Central and State Finance Ministers. According to the calculations, every 1% increase in the 5% slab, which mainly comprises packaged food, would bring about an additional income of Rs 50,000 crore per year. Although various options are being considered, the Council is likely to settle for an 8% GST (goods and services tax) on most items which are currently subject to a 5% levy .

Under the GST, essential items are either exempt or taxed at the lowest rate, while luxury and demerit items are subject to the highest tax. Luxury and Sin products are also attracting divestments in addition to the top 28% slab. This cess collection is used to compensate states for the loss of revenue due to the rollout of the GST.

With the GST Offset Scheme ending in June, it is imperative that states become self-sufficient and not dependent on the Center to fill the revenue gap in GST collection.

The Council had set up a group of state ministers last year, led by Karnataka Chief Minister Basavaraj Bommai, to suggest ways to raise revenue by streamlining tax rates and fixing anomalies in the tax structure. The group of ministers is expected to finalize its recommendations early next month, which will be submitted to the Council at its next meeting, likely in mid-May, for a final decision.

At the time of the implementation of the GST on July 1, 2017, the Center had agreed to indemnify the states for five years until June 2022 and to protect their income at 14% per annum against the income of the year. baseline from 2015-2016. Over the years, the GST Board has often succumbed to demands from trade and industry and lowered tax rates. For example, the number of goods subject to the highest 28% tax fell from 228 to less than 35.

While the Center sticks to its stance of not extending GST compensation beyond five years, states are realizing that raising revenues through higher taxes is the only option before the Council.

First post: STI


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