GST Council likely to consider proposal to provide slab rate beyond 40% on specific items

The GST Council, scheduled to meet on September 3-4, may consider a proposal to raise the maximum possible slab rate beyond 40 per cent, sources have indicated. Once enacted, this will help to maintain tax incidence on luxury and high-end items such as SUVs (Sports Utility vehicles) and sin goods.

At present, SUVs attract slab rate of 28 per cent and compensation cess ranging between 15- 22 per cent, based on category, taking total incidence on account of GST to 43 – 50 per cent. Legally, based on Section 9(1) of the CGST Act, 2017 and corresponding provision of SGST Acts, maximum slab rate can be 40 per cent. Accordingly, a proposal by the Centre, which was endorsed by the Group of Ministers (GoM),  prescribes special slab of 40 per cent for 5-7 items. However, States such as West Bengal are demanding an amendment in the law to provide for a maximum slab over 40 per cent, so that higher taxes can be levied on specific goods.

It may be noted that cess cannot be imposed under GST as according to the Constitution, it is non-sharable. Though the GST regime has Compensation Cess, it is for a specific purpose and that too through special law. In such a situation, flexibility to go beyond 40 per cent can help both Centre and States to maintain the GST revenue on some specific goods.

Official sources have maintained that tax incidence on tobacco and tobacco products will be maintained. Here in the absence of compensation cess,  maintaining the tax incidence on tobacco and tobacco related products will not be a problem as they can be subjected to additional levy under Central Excise duty. Still, flexibility in slab will help the tax administration to levy higher tax.

According to an tax expert, Parliament can amend the GST law to create a higher special category if required through a legislative process.

Another tax expert also said that if there is an intention to introduce a special category permitting rates above this ceiling, a statutory amendment to Section 9(1) (of CGST Act) would be necessary.

Source from: https://www.thehindubusinessline.com/economy/gst-council-likely-to-consider-proposal-to-raise-maximum-rate-slab/article69971132.ece

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