New Delhi. Taking a major step towards further simplifying GST, the Group of Ministers (GoM) has recommended new two-slab rates. These will include rates of 5% and 18%, as well as a special rate of 40% for ultra-luxury and demerit goods. The proposal will now be placed for discussion and approval in the next meeting of the GST Council.
GoM convenor and Bihar Deputy Chief Minister Samrat Choudhary said that the Centre’s proposal to remove two slabs has been accepted. He informed that this step has been taken to further simplify GST. Uttar Pradesh Finance Minister Suresh Khanna also described it as in the interest of the common people. He said that items like luxury cars will be taxed at 40%, which will reduce the tax burden on normal goods.
However, not all states are fully in agreement with this change. West Bengal Finance Minister Chandrima Bhattacharya warned that the income loss to the states will ultimately affect the common people. He said that the Center will have to give a clear roadmap to compensate for the revenue loss. Also, the increase in taxes in sectors like insurance should not put additional burden on families.
Bhattacharya also said that legal changes will be necessary to implement the new slabs. Compensation cess will have to be merged into GST and a special schedule will have to be made for the new rate of 40%.
This proposal is expected to be discussed in depth in the upcoming meeting of the GST Council. Experts believe that this reform can make the indirect tax system more efficient, but the issue of compensating the revenue loss of the states will remain the biggest challenge.
