The Goods and Services Tax Council ended its three-day meeting a day ahead of schedule on Wednesday after states failed to reach a consensus on the rate bands for the new regime, The Hindu reported. The Council will now discuss the rate structure in its next meetings on November 3 and 4.
The states also reportedly failed to come to an agreement on the Centre’s proposal to impose a cess over the GST on luxury items. Revenue Secretary Hasmukh Adhia said the states were of the opinion that it was not possible to segregate goods and services. He said, “For instance, restaurants register for both service tax and Value Added Tax [which is imposed exclusively on goods].”
Meanwhile, Union Finance Minister Arun Jaitley said the final tax slabs would depend on the source of funds that the Centre intends to use to compensate states for revenue losses incurred after the shift to the GST regime, NDTV reported. Jaitley said that while all the members of the Council had “converged towards a consensus”, the details would be worked out during the Council’s next meetings.
On Tuesday, the Council discussed a four-slab rate band structure with the lowest rate of 6% to be imposed on essential items, and the highest rate of 26% for luxury goods and demerit items such as tobacco, cigarettes, aerated drinks, and polluting items. It also discussed standard rates of 12% and 18%. It further proposed the exemption of food items and 50% of commonly used items from the purview of the GST.
Adhia had said that less than 10% of the taxable goods would fall in the lowest rate bracket, while 70% of the taxable base would come in the lower and standard rate brackets. About 25% of the tax base would fall in the highest rate bracket, he had said, adding that fast-moving consumer goods and consumer durable products would attract 26% GST rate, against the current 31%.