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Centre suggests five goods & service tax slabs from 6% to 12, 18 & 26%
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Thursday, 20 October, 2016, 08 : 00 AM [IST]
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Ashwani Maindola, New Delhi
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fiogf49gjkf0d The goods and service tax (GST) Council met in New Delhi to discuss the rates of taxes in the new tax regime and is likely to come out with slabs. The Centre suggested five tax slabs, from six per cent to 12, 18 and 26 per cent.
The GST Council also agreed on a formula to compensate states in case of a revenue loss after moving to the new system.
It was suggested that food items be exempted from tax keeping in view the inflation, and there was a proposal to levy extra cess on demerit goods such as soft drinks, which comprise about 25 per cenr of the taxable base, beyond 26 per cent.
It was proposed that the higher rate for services under the indurect tax regime be 18 per cent, while there was a suggestion to tax essential services such as transportation at either six per cent or 12 per cent.
Revenue secretary Hasmukh Adhia said that it was proposed that 70 per cent of the taxable base be taxed at either 18, 12 or six per cent, and over 50 per cent of the items of common use be taxed at either 12 or 18 per cent to keep inflation under check.
For compensation to the states, 2015-16 will be taken as the base year to calculate revenue, assuming a secular or long-term growth rate of 14 per cent. The states will be fully compensated for five years for potential revenue loss.
The GST Council also finalised area-based exemptions and how the eight north-eastern states and three hilly states would be treated under the new tax regime.
“The tax exemptions given by these states as incentives to the industry will be counted in the definition of revenue for calculation of revenue loss,” said finance minister Arun Jaitley.
“A detailed note on GST was submitted by the All India Food Processors’ Association (AIFPA) to the government, with the suggestion that processed foods be kept at a nil/minimum level,” said Sagar Kurade, president, AIFPA.
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