GST rate revision: Surplus may be used to pay states

THE TWO-DAY GST COUNCIL MEETING WILL CONSIDER ELIMINATING 2 OUT OF 4 TAX SLABS (12% AND 28%) AND RETAIN THE 5% AND 18% RATES WITH A SLAB OF 40% FOR LUXURY GOODS

- Rajeev Jayaswal

The Goods and Services Tax (GST) Council may consider compensating states for their immediate revenue losses on account of a proposed GST rate rationalisation — tapping an estimated surplus of ₹40,500 crore in the compensation fund for this purpose, people familiar with the matter said.

There is near unanimity among members of the council, the apex decision making authority on all matters related to GST, on pruning the GST slabs from four to two to reduce tax burden on the consumer, but some of them have demanded that the rate rationalization exercise must also protect their revenues, the people added on condition of anonymity. Ahead of the 56th GST Council’s meeting on September 3 and 4, an officer-level meeting was held on Tuesday to prepare the ground.

The two-day meeting of the 56th GST Council in New Delhi will consider the Centre's proposal to eliminate two out of four tax slabs (12% and 28%) and retain the 5% and 18% tax rates with a special slab of 40% for so-called luxury and sin goods. On Independence Day, Prime Minister Narendra Modi proposed the next generation reforms in the indirect taxes (GST 2.0) regime with an emphasis on rate rationalisation, structural reform and ease of living.