NEW DELHI: The Centre has proposed four slabs for the goods and services tax (GST) in addition to a cess on sin and luxury goods that will help it mop up close to Rs 50,000 crore to compensate states for any possible revenue loss under the new tax regime.
At a meeting of the GST Council on Tuesday, the Union finance ministry proposed slabs of 6%, 12%, 18% and 26%, along with a 4% levy on gold. For environmentally sensitive items such as coal (where a cess is already in place), sin goods such as aerated drinks, tobacco and pan masala and luxury carsand watches, a cess has been suggested, revenue secretary Hasmukh Adhia told reporters.
The cess will ensure that the levy on these items is not changed and the money raised will flow into a special fund to meet compensation requirements. While the cess on coal fetches Rs 26,000 crore annually, the tax on sin and luxury goods is expected to help the Centre mop up another Rs 24,000 crore.
Although goods- or services-wise classification will only be done once the states agree to the slabs, consumer durables and a large number of FMCG products are expected to be in the 26% bracket.
“The principle is clear, the rate should be inflation neutral, it should generate adequate resources for the Centre and the states and the taxpayer should not be burdened,” finance minister Arun Jaitley said after the meeting.
Later, Adhia said the intent was to work out slabs in a way that the overall burden on the consumer came down.
Currently, he said, the total levy on consumer durables added up to around 27% along with another 4% burden due to central sales tax (CST). Under the proposed regime, the burden will reduce to 26%.
Overall, Adhia said, nearly a quarter of the burden due to CST and octroi would go away, while Krishi Kalyan cess would be subsumed in the overall GST levy. Last year, the states collected Rs 4.4 lakh crore, of which CST and octroi added up to around Rs 1 lakh crore.
Source : http://www.timesofindia.com/business/india-business/Centre-plans-four-GST-slabs-cess-on-luxury-and-sin-goods/articleshow/54927359.cms