Centre plans four GST slabs; 4% levy on gold
The GST Council has mooted four slabs for the goods and services tax (GST) in addition to a cess on sin and luxury goods that will help it collect close to Rs. 50,000 crore to compensate states for any possible revenue loss under the new tax regime.
The Union Ministry of Finance (MoF) proposed slabs of 6 per cent, 12 per cent, 18 per cent and 26 per cent, along with a 4 per cent levy on gold. For environmentally sensitive items such as coal (where a cess is already in place), sin goods such as aerated drinks, tobacco and pan masala and luxury cars and watches, a cess has been suggested.
The cess will ensure that the levy on these items is not changed and the money raised will flow into a special fund to meet compensation requirements. While the cess on coal fetches Rs. 26,000 crore annually, the tax on sin and luxury goods is expected to help the government collect another Rs. 24,000 crore.
Although goods- or services-wise classification will only be done once the states agree to the slabs, consumer durables and a large number of FMCG products are expected to be in the 26 per cent bracket.
The idea was to work out slabs in a way that the overall burden on the consumer came down. Currently, he said, the total levy on consumer durables added up to around 27 per cent along with another 4 per cent burden due to central sales tax (CST).
Under the proposed regime, the burden will reduce to 26 per cent. Overall, nearly a quarter of the burden due to CST and octroi would go away, while Krishi Kalyan cess would be subsumed in the overall GST levy. Last year, the states collected Rs. 4.4 lakh crore, of which CST and octroi added up to around Rs. 1 lakh crore.
* Gold traders had been pitching hard for GST rate at 4 to 5 per cent. Now that the GST will be levied at 4 per cent (with the proposed merging of all indirect taxes) and Customs Duty at 10 per cent, the consumer will need to pay taxes to the extent of 14 to 16 per cent on the purchase of gold.