Assocham urges FM to hike GST rate by 1-2% instead of levying cess

02 Nov 2016 Evaluate

Arguing against the levy of cess, the Associated Chambers of Commerce & Industry of India (Assocham) has urged Finance Minister Arun Jaitley to hike the proposed Goods and Services Tax (GST) by 1-2 percent instead of levying cess to compensate states for revenue loss under the GST regime. Assocham Secretary General D S Rawat has said that even if multiple rates are accepted by the GST Council, additional cess should not be made applicable as this would lead to distortion and cascading of taxes. He further said that the idea behind the levying cess is to make a corpus for compensation to states does not seem to be feasible. The additional revenue required for such compensation can be collected by increasing the proposed tax rates by 1-2 per cent instead of levying a cess.

However, the suggestion is at variance with Jaitley's contention, who had favoured levy of cess on tobacco and luxury products to compensate states, saying the cost of funding that through an additional tax would be exorbitantly high and almost unbearable. Assocham has also suggested that essential commodities of mass consumption like fruits, vegetables, grains etc should be taxed at zero rate. Processed food products for mass consumption like dairy products, rice, edible oil, biscuits should attract 6 per cent duty. It further suggested that mobile phones, computers, fruit juices, pet foods be taxed at 12 per cent and other items at 18 per cent. Luxury cars, tobacco and pan masala should be taxed at 26 per cent.

Earlier, GST council meeting had discussed four slab tax rate structure of 6 per cent, 12 per cent, 18 per cent and a peak rate of 26 per cent, which will mostly apply to FMCG and consumer durables. Also, a cess is likely to be levied on demerit or sin goods and polluting items. Under this structure, the items which are currently taxed between 3-9 per cent will fall in the 6 per cent bracket and those in 9-15 per cent range will come under 12 per cent rate. Moreover, the products which are currently taxed between 15-21 per cent will attract 18 per cent levy, while above 21 per cent will be taxed at the peak rate of 26 per cent. The next meeting of the GST Council, chaired by Finance Minister Arun Jaitley, is scheduled on November 3-4.

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