NEW DELHI: The goods and services tax (GST) Council, which is scheduled to meet on March 4-5, is likely to firm up on a proposal to raise the peak tax rate to 40 percent, from the current 14 percent, in the model GST Bill. If approved, it will rule out the requirement for approaching Parliament for any change in rates in the future.
The Centre plans to introduce in Parliament the Central GST (CGST) Bill in the forthcoming session beginning March 9. The government is to roll out GST from July 1.
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 per cent. Officials in the finance ministry explained that the change in the peak rate would not alter the 4-slab rate structure of 5, 12, 18 and 28 per cent, which has already been agreed upon last year.
The inclusion of this clause into the model law could ensure that the problems on tax rate do not arise in future.
This means the central GST and state GST can be up to 20 per cent each, leaving the scope for a maximum levy at 40 per cent.
In November 2016, a revised draft of model GST law proposed a maximum rate of tax under the new regime at 14 per cent (14 per cent central GST and an equal state GST, taking the total to 28 per cent).
“There shall be levied a tax called the central/state goods and services tax (CGST/SGST) on all intra-state supplies of goods and/or services... at such rates as may be notified by the central/state government... but not exceeding 14 per cent on the recommendation of the Council and collected in such manner as may be prescribed,” the draft law states.
“In future, if there is a need to hike tax rates, there is no need to approach Parliament for a nod and the GST Council can raise it,” finance ministry officials explained.
If this is agreed to, then the central GST and state GST can go up to 20 per cent each, leaving the scope for a maximum levy at 40 per cent. “There is no change in 4-tier rate structure that but you can say a plan ‘B’ is inbuilt for Council to exercise at a later stage,” said an official.