The GST council could consider a proposal at its meeting next month to abolish the five percent plate by moving some mass-consumer goods to three percent and the rest to eight percent categories, PTI news agency reported. The Council can also decide to prune the list of exempt products by moving part of the non-food products to 3 percent paste.
Currently, the GST system has four plates: 5 percent, 12 percent, 18 percent, and 28 percent. There are 480 items under 18 percent plate, of which about 70 percent come from the GST collections. In addition, there is an exempt list of items such as unbranded and unpackaged food that are not subject to the levy.
The report said talks are underway to raise the 5 percent record to 7 or 8 or 9 percent, a final call will be made by the GST council, which includes finance ministers from both the Center and the states. . The Council will most likely settle for 8% GST for most items currently subject to a 5% levy.
According to an earlier report from FE, the government also plans to reduce the number of GST plates from the current four to three. The report said a new 15 percent media plate could be introduced instead of 12 percent and 18 percent plates. “The 5 percent rate will be replaced by a new rate that will be 6 or 7 percent, but the rate adjustment will be done in a way that no more than four plates are created at any one time,” the report said.
Each 1 percent increase in the 5 percent plate, which mainly includes packaged food products, will generate additional revenue of about Rs 50,000 crore per year.
Under GST, essential items are exempt or taxed at the lowest rate, while luxury and worthless items draw the highest tax. Luxury and sinful goods are also attracting cession atop the highest record of 28 percent. This cess collection is used to compensate states for the loss of revenue due to the rollout of GST.
The GST Compensation Scheme will expire in June. The Council had set up a panel of state ministers last year, led by the chief minister of Karnataka, Basavaraj Bommai, to propose ways to increase revenues by rationalizing tax rates and correcting anomalies in the tax structure.
The panel is likely to finalize its recommendations early next month, which will be presented to the Council for a final decision at its next meeting, likely in mid-May.
The central government had an obligation to compensate the states for their revenue shortfall as a result of the rollout of the GST regime. The compensation would be given for five years until June 2022. The Center had also agreed to protect the states’ revenues at 14 percent per annum on base year revenues of 2015-16.
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