GST Council may look at higher peak rate of 20%

Ahead of the second half of the Budget session of Parliament, the Centre and States will meet here to finalise the draft laws for the Goods and Services Tax (GST), which will include a revised proposal for a higher peak rate of 20 per cent.

The GST Council, in its meeting on March 4 and 5, is likely to finalise a provision to keep the peak rate under the indirect tax levy at 20 per cent. This means the combined incidence of Centre and State GST could rise up to as high as 40 per cent.

This is in contrast to the revised draft of the model Centre and State GST Bills that was released last year, which proposed a cap of 14 per cent. This would in effect lead to a combined incidence of 28 per cent.

Sources said the proposal will only ensure that the GST Council can revise rates without having to seek Parliamentary approval and it will in no way impact the four tier-rate structure that has already been approved.

The Council, in its meeting in November, had agreed to a four-rate structure under GST of 5, 12, 18 and 28 per cent.

However, whether the proposal will pass muster with all the States is yet to be seen. The draft model laws have been circulated to the States.

In its earlier meeting held in Udaipur on February 18, the GST Council had approved the draft Compensation Bill. The remaining three Bills — for Centre, State and Integrated GST — could not be taken up as some States are understood to have raised concerns over various modalities of the Council.

Meanwhile, Andhra Pradesh Finance Minister Yanamala Ramakrishnudu is understood to have written a letter to the GST Council, opposing the model to tax territorial waters up to 12 nautical miles. He had noted that the High Court has already decided in favour of States and the matter is now pending in the Supreme Court.