Most of the states in the country have agreed to this option on the issue of increasing revenue to eliminate their dependence on the central government for compensation.
New Delhi, Dt
A meeting of the GST (Goods and Services Tax) Council is scheduled for next month. At this meeting the council may repeal the five per cent tax slab.
By repealing this slab, the GST Council may consider a proposal to divide it into three and eight per cent slabs. According to the report, most of the states in the country have agreed to this option on the issue of increasing revenue to eliminate dependence on the Center for compensation. According to the proposal, some items of mass consumption will be kept in the three per cent tax slab and the rest will be taxed in the eight per cent slab. At present GST has a total of four tax slabs of 8, 12, 12 and 5 per cent. In addition, gold and gold jewelery are taxed at three per cent. According to sources, the council may focus on raising revenue by bringing some non-food items that are not taxed into the 5 per cent slab to boost revenue.
Sources said discussions are underway to make the five per cent slab seven or eight or nine per cent. The final decision in this matter will be taken by the GST Council comprising the Union Finance Minister and the Finance Ministers of the states. If the five per cent slab is increased by one per cent, it will result in an annual increase of Rs. 20,000 crore will be earned. This slab consists mainly of packaged foods. Under GST, the rate of tax on essential items is kept the lowest or they are exempted from tax. While the highest tax of 5% is levied on luxury items and this amount is given to the states to offset the losses incurred due to implementation of GST. At the time of implementation of GST on July 1, 2016, the Center had agreed to provide compensation to the states for five years till June, 206 and to provide security of their income at the rate of 15% per annum over the base income of 2016-17.
The council last year set up a committee of state ministers under Karnataka Chief Minister Basavaraj Bomai to suggest ways to increase revenue by rationalizing tax rates and eliminating discrepancies in the tax structure. The committee is expected to finalize its recommendations early next month. It will then be presented to the next meeting of the Council for final decision. The meeting is expected to take place in mid-May.
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