Central, state officials discuss GST rate on goods, services

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Tax officers of both central and state governments on Wednesday discussed various aspects of draft GST laws, the tax rate on various goods and services and exempted ones under the indirect tax regime, which is likely to kick in from April next year.

Revenue Secretary Hasmukh Adhia chaired the meeting to finalise the draft GST laws and the meeting would continue on Thursday.

Officials said the report of the officers' committee will be taken up by the GST Council, which is headed by Union Finance Minister and has state ministers as members, at its next meeting on November 25.

At its last meeting, the Council agreed on a four-slab structure - 5, 12, 18 and 28 per cent - along with a cess on luxury and 'sin' goods, including tobacco.

Under the structure, the clean energy cess and that of luxury items and demerit goods will be utilised to create a Rs 50,000 crore fund every year which will be utilised to compensate the states for first five years of GST rollout.

With a view to safeguarding the interest of poor and keeping inflation in check, it has been decided that half the items in the CPI basket like foodgrains will not be taxed at all.

However, the committee of state and central officers will have to work out the final list of items for each tax bracket.

There have been indications that soap, oil, shaving stick, toothpaste and such products will likely fall in the 18 per cent bracket, similar to most services.

Finance Minister Arun Jaitley has already said the tax incidence on goods will be worked out in a manner such that the GST levy will be somewhere close to the current tax rate (excise duty plus VAT).

The items and the tax bracket will form part of the Central GST (CGST) legislation, which the GST Council will take up for discussion at its meeting on Friday. The meeting will also approve the Integrated GST (IGST) and the draft compensation law.

The GST Compensation Bill will provide a legal backing to the Centre's promise to compensate the states if their revenue growth rate falls below 14 per cent in the first five years of the GST rollout. The base year for calculating the revenue of a state has been decided as 2015-16.

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