GST Council may look at higher peak rate of 20%

The GST Council has proposed to raise the peak tax rate to 20 per cent, from the current 14 per cent, in the model goods and services tax Bill to preclude the requirement of approaching Parliament for any change in rates in future. The GST Council, in its meeting on March 4 and 5, is likely to finalise a provision to keep the peak rate under the indirect tax levy at 20 per cent. This means the combined incidence of Centre and State GST could rise up to as high as 40 per cent.

This is in contrast to the revised draft of the model Centre and State GST Bills that was released last year, which proposed a cap of 14 per cent. This would in effect lead to a combined incidence of 28 per cent.

Sources said the proposal will only ensure that the GST Council can revise rates without having to seek Parliamentary approval and it will in no way impact the four tier-rate structure that has already been approved.

The Council, in its meeting in November, had agreed to a four-rate structure under GST of 5, 12, 18 and 28 per cent.

The change in the peak rate will not alter the 4-slab rate structure of 5, 12, 18 and 28 per cent agreed upon last year, but is only a provision being built into the model law to take care of contingencies in future, two officials in the know told PTI.

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.

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.

However, whether the proposal will pass muster with all the States is yet to be seen. The draft model laws have been circulated to the States.

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