Council proposes ‘clause’ to levy GST peak rate up to 40 percent


New Delhi, March 3: As Goods and Services Tax (GST) Bill gears up to be presented in the second part of the Budget session beginning March 9, the GST Council has proposed power to raise the rate up to 40 per cent for any item in future, and that too without parliamentary approval.

The industry and tax experts are not happy with the proposal and believe that the rates should stay moderate even in the future.

The GST Council, which is headed by Finance Minister Arun Jaitley, has proposed an enabling provision in the GST Bills for Central GST (CGST) and state GST (SGST). It suggests a peak rate of 20 per cent each from current 14 per cent in the draft bill, which would take the limit to 40 per cent from 28 per cent.

However, the current slabs of 5, 12, 18 and 28 and cess will not be touched upon at least for now. The central government wants to roll out GST by July 1.

It should be noted here that the revised GST draft model laws had capped 14 per cent maximum limit for both central GST and state GST in November 2016.

There shall be levied a tax called the central/state goods and services tax (CGST/SGST) on all intra-state supplies of goods and/or services… at such rates as may be notified by the central/state government…but not exceeding 14 per cent on the recommendation of the Council and collected in such manner as may be prescribed,” the draft law states.

This ’14 per cent’ is not proposed to be ‘not exceeding 20 per cent’. After the change, the GST Council will get an enabling provision power to exercise the change in the future.

The GST Council is scheduled to meet on Saturday and Sunday to finalise the CGST, SGST and IGST laws. It is expected that the enabling provision would be taken up the in the meeting.

Pratik Jain, indirect tax leader at consultancy PwC India said, “It is important for the government to realise that the benefits of GST will only accrue if rates are moderate and the tax base is enhanced. It might be prudent for the Council to reconsider this decision.”

Wefornews Bureau

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