GoM favours Centre’s GST rejig, opposition states want to see maths

New Delhi, Aug 21: A panel of ministers from different states on Thursday in principle approved the Centre’s proposed sweeping GST reforms through rate cuts, but some opposition-ruled states wanted to know the revenue loss from the move and how that would be bridged.

The Group of Ministers, headed by Bihar Deputy Chief Minister Samrat Choudhary, discussed the Centre’s proposal of reducing the number of slabs under the Goods and Services Tax (GST) to 2 (5 and 18 per cent) from 4 (5, 12, 18, and 28 per cent). The Centre has also proposed a 40 per cent rate for 5-7 select goods.

While the GoM was in favour of rate and slab rejig if it benefited the common man, some members wanted ultra-luxury items, like high-end cars, to be subject to an additional levy on top of the special 40 per cent tax.

Recommendations of the six-member panel, which has 3 members from BJP-ruled states of Bihar, Uttar Pradesh and Rajasthan, and an equal number from opposition-ruled states of Karnataka (Congress), Kerala (Left Front) and West Bengal (TMC), will go to the high-powered GST Council, which will take the final call on the reforms.

“The GoM has decided to accept the two proposals of the Centre,” Bihar Deputy Chief Minister Samrat Choudhary said. The proposal of the Centre to remove the 12 and 28 per cent slabs was accepted, and we have given recommendations,” Choudhary said.

Uttar Pradesh Finance Minister Suresh Kumar Khanna said all states welcomed the Centre’s proposal, saying it is in the interest of the common man. Ultra-luxury goods, including ultra-luxury cars, and sin goods will fall in the 40 per cent tax bracket.

“Some states demand that states should be compensated for revenue loss upon implementation of the new rate structure. The revenue loss will be calculated,” Khanna said.

West Bengal Finance Minister Chandrima Bhattacharya said the Centre’s proposal presented before the GoM on rate rationalisation did not include the revenue loss that is going to accrue on account of rate and slab changes.

“We have said we are okay with any rate rationalisation proposal, which is pro-people, but we should also know what is the revenue loss that we are going to suffer. Because, ultimately, if a state suffers any loss, then it boils down to the sufferance of the common man. The GST Council will discuss the rate proposal item by item,” she said.

Bhattacharya said she has suggested that Section (1) of the GST Act be amended so that a levy can be imposed over and above the 40 per cent maximum permissible rate to ensure that the tax incidence on ultra-luxury and sin goods remains the same even after the slab changes and once the compensation cess ends.