GST council raises peak rate to 40% from 14%

The Dollar Business Bureau 

After the GST Council advocated increasing the peak rate of the bill from its current 14% to 20%, the resultant GST rate may go up to as much as 40%.

The new model of GST Bill will replace the old clause which says tax rate "not exceeding 14%, with "not exceeding 20%. The bill will come up for debate during the second phase of the upcoming parliament session next week.

The change in the GST peak rate, however, will not change the 4-slab rate structure of 5%, 12%, 18% and 28%.

The government had unveiled a revised draft of model GST law in November 2016, which has a maximum levy under the new regime at 14% (14% central GST and 14% state GST, taking the total to 28%.

According to the draft laws, 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% on the recommendation of the Council and collected in such manner as may be prescribed.

The GST Council, led by Finance Minister Arun Jaitley, has agreed to increase the upper band of the rate at 20%.

"For the moment, we will not tinker with the rate structure of 5, 12, 18 and 28 per cent. The GST Council has decided to keep the upper cap higher at 20 per cent so that in future in case of need to hike tax rate, there is no need to approach Parliament for a nod and the GST Council can raise it," officials familiar with the matter said to PTI.

"The 4-tier rate structure that has been decided will hold for now. By keeping the upper cap at 20 per cent, we are just keeping an enabling provision which the Council can exercise at a later date after deliberation," the officials added.

The Central government, state governments and Union Territories will firm up the CGST, the SGST and the UTGST framework, respectively.

The government looks to introduce the CGST Bill in the forthcoming session in the parliament.