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GST council defers decision on rate to next month; cess on luxury goods likely

NEW DELHI(PTI): A decision on GST rate was put off to next month on Wednesday even as the Centre and states converged towards a consensus on levying a cess on luxury and sin goods in addition to the highest rate of tax in the new regime.

The cess 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. An informal consensus was reached at the end of the two-day meeting of the GST Council on a four-slab tax structure of 6, 12, 18 and 26 per cent. The lower tariff will be for essential items and the highest bracket for luxury and sin goods like tobacco, cigarettes and alcohol, but a decision was put off to the next meeting.

Finance Minister Arun Jaitley said the GST Council, that includes representatives of all states, will meet again on November 3-4 to decide on the tax rates. The GST Council, which was originally to meet for three days, “converged towards a consensus on source of funding for state compensation,” Jaitley said. On tax structure, he said, “We cannot under-tax or over-tax to keep rate slabs minimum.”

The attempt, he said, was to fit zero rated items while levying a 6 per cent tax on items that are currently charged 3-9 per cent tax. “We will finalise the tax structure at the next meeting,” he said, indicating there were two standard rates of 12 per cent and 18 per cent under discussion. Once the GST rates are decided, the GST Council will meet again on November 9-10 to finalise the draft legislations, he said.

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