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  3. GST Council proposes to raise peak tax rate to 40% in model GST Bill

GST Council proposes to raise peak tax rate to 40% in model GST Bill

03 Mar 2017 Evaluate

In order to obviate the need for approaching Parliament for any change in rates in future, the GST Council has proposed to raise the peak tax rate to 40 percent after the GST Council proposed raising the peak rate in the Bill to 20 percent, from the current 14 percent, in the model goods and services tax (GST) Bill. Though, the change in the peak rate will not alter the 4-slab rate structure of 5, 12, 18 and 28 percent agreed upon last year, but is only a provision being built into the model law to take care of contingencies in future. The highest rate levied on goods will still be 28 per cent (14 per cent central GST and 14 per cent state GST). Demerit and luxury goods will attract higher 28 per cent rate plus cess.

The GST Council, headed by Finance Minister Arun Jaitley and comprising representatives of all states, has agreed to keep the upper band of the rate in the law at 20 percent. This means the central GST (CGST) and state GST (SGST) can be up to 20 percent each, leaving the scope for a maximum levy at 40 percent. Mirroring the model GST law, the CGST, SGST and UTGST law will be firmed up by the Centre, states and Union Territories, respectively. The Centre plans to introduce in Parliament the CGST Bill in the forthcoming session beginning March 9. After it is ratified, the states will introduce the SGST Bill in their respective legislative Assemblies.

Meanwhile, the central and state officials will soon start the exercise to determine which goods and services should fall in which tax bracket and the same will be taken to the Council for approval soon. Together with this, they will also decide the goods and services that would attract a cess on top of the peak rate to create a corpus that can be used to compensate states for any loss of revenue from implementation of GST in the first five years.

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