<p>The all-powerful Goods and Services Council on Tuesday proposed a cess on luxury goods, prompting criticism from some states and businesses.<br /><br />Chaired by Finance Minister Arun Jaitley, the council also discussed a four-tiered tax regime of 6, 12, 18 and 26%. Gold is expected to attract a lower standard tax of 4%. A meeting on Wednesday will firm up the rates.<br /><br />The cess is envisaged over and above the 26% tax proposed on luxury goods. Earlier, a panel headed by Chief Economic Advisor Arvind Subramanian had proposed a 40% levy on luxury and ‘demerit’ goods. <br /><br />In economics, a product is labelled ‘demerit’ if its consumption is considered unhealthy or socially undesirable. The cess will compensate states that may incur losses once the GST comes into force, Jaitley said, adding that the impact of inflation could be cushioned if additional revenues are raised with the help of such a levy.<br /><br />A uniform growth rate of 14% will be taken into account for calculating the likely revenue of each state in the first five years of GST implementation, Jaitley said. The Centre will compensate states earning less than the projected revenue, he explained.<br /><br />The GST Council proposes no tax on 92 items of common consumption. These are mostly food items, comprising 50% of the consumer price index and contributing to the retail inflation basket. Taxi and auto fares will also attract 6 per cent, a highly placed source who attended the meeting told DH.<br /><br />Items currently levied 27 per cent will be taxed at just 18 under the GST regime. “The proposed structure is such that the impact on retail inflation is minimal,” the source said.<br /><br />Emerging from the meeting, Kerala Finance Minister Thomas Isaac spoke against the proposed cess on luxury goods. But Uttar Pradesh was in favour of the idea.<br /><br />Manufacturing states have not reacted to the proposal yet. But industry leaders said a cess is completely outside the domain of GST, and the council had no business discussing it.<br /><br />In place of a cess, some industry leaders favoured a tax rate higher than the 26 per cent proposed on luxury goods. The government proposes to roll out GST from April 1, 2017.<br /><br />DH News ServiceConsumer goods such as cooking oil (mustard, groundnut, coconut, refined, ghee and butter), pulses, spices, chicken, coffee powder and tea are proposed to be taxed at 6% under the GST regime.</p>
<p>The all-powerful Goods and Services Council on Tuesday proposed a cess on luxury goods, prompting criticism from some states and businesses.<br /><br />Chaired by Finance Minister Arun Jaitley, the council also discussed a four-tiered tax regime of 6, 12, 18 and 26%. Gold is expected to attract a lower standard tax of 4%. A meeting on Wednesday will firm up the rates.<br /><br />The cess is envisaged over and above the 26% tax proposed on luxury goods. Earlier, a panel headed by Chief Economic Advisor Arvind Subramanian had proposed a 40% levy on luxury and ‘demerit’ goods. <br /><br />In economics, a product is labelled ‘demerit’ if its consumption is considered unhealthy or socially undesirable. The cess will compensate states that may incur losses once the GST comes into force, Jaitley said, adding that the impact of inflation could be cushioned if additional revenues are raised with the help of such a levy.<br /><br />A uniform growth rate of 14% will be taken into account for calculating the likely revenue of each state in the first five years of GST implementation, Jaitley said. The Centre will compensate states earning less than the projected revenue, he explained.<br /><br />The GST Council proposes no tax on 92 items of common consumption. These are mostly food items, comprising 50% of the consumer price index and contributing to the retail inflation basket. Taxi and auto fares will also attract 6 per cent, a highly placed source who attended the meeting told DH.<br /><br />Items currently levied 27 per cent will be taxed at just 18 under the GST regime. “The proposed structure is such that the impact on retail inflation is minimal,” the source said.<br /><br />Emerging from the meeting, Kerala Finance Minister Thomas Isaac spoke against the proposed cess on luxury goods. But Uttar Pradesh was in favour of the idea.<br /><br />Manufacturing states have not reacted to the proposal yet. But industry leaders said a cess is completely outside the domain of GST, and the council had no business discussing it.<br /><br />In place of a cess, some industry leaders favoured a tax rate higher than the 26 per cent proposed on luxury goods. The government proposes to roll out GST from April 1, 2017.<br /><br />DH News ServiceConsumer goods such as cooking oil (mustard, groundnut, coconut, refined, ghee and butter), pulses, spices, chicken, coffee powder and tea are proposed to be taxed at 6% under the GST regime.</p>
