New Delhi: Centre and states on Wednesday failed to decide the tax rate under the new GST regime even though they “converged towards a consensus” on levying a cess in addition to the highest rate of tax on luxury and sin goods.
There were differences on the issue of dual control with states demanding control over 11 lakh service tax assessees, and Centre proposing to do away states having exclusive control over all dealers up to an annual revenue threshold of Rs 1.5 crore — an issue which was settled in the first meeting of the GST Council.
The proposed cess on luxury and sin goods like tobacco, cigarettes and alcohol would be used to compensate states for any loss of revenue they may suffer from implementation of Goods and Service Tax (GST) in first five years beginning April 1, 2017.
There was virtual consensus among states on imposing of the cess, which tax experts and industry has vehemently opposed, saying it defeats the very concept of one-nation, one-tax.
A four-slab tax structure of 6, 12, 18 and 26 per cent with lower tariff for essential items and the highest bracket for luxury and sin goods also found favour with them but a decision was put off to the next meeting on November 3-4.
Finance Minister Arun Jaitley said the GST Council, that includes representatives of all states, will meet again next month and decide on tax rates.
“The discussion that slab should be least is a good discussion. But if we lose tax revenue or levy very high tax in order to keep that slab low — that is not appropriate.
“So the effort will be to fit the taxpayer in the closest GST tax bracket which he is paying now,” he said.
The GST Council meeting, which was originally scheduled for three days, ended in two days after marathon discussions.
The Council “converged towards a consensus on source of funding for state compensation,” Jaitley said.
Revenue Secretary Hasmukh Adhia said the GST Council will decide the tax slab and then the officers committee will decide on which commodity will fit in where.
“We are very optimistic of finishing the discussion by November 22. We are making good progress. The Finance Minister could have taken a short cut in arriving at decision by voting out issues, but he is developing a consensus among states and Centre,” he said.
Asked whether the relook into dual control would mean a review of the Rs 1.5 crore threshold limit which was already decided, Adhia said, “It is being looked at. The issue is being rediscussed. Whether that threshold should remain or not that will be decided.”
Jaitley said the rate structure can be determined only after deciding whether compensation to states is to be funded out of the rate structure or some special cess or any other source.