The Goods and Service Tax Council may raise the upward ceiling of the tax rate to 40% so that certain high rate inviting commodities can be taxed. Effectively, the new ceiling will raise the peak rate of centre and state rates individually to 20%. Under GST, both centre and states have equal ceiling rates.
As per the original scheme, the maximum rate was 28% implying a peak rate of 14% for both the centre and states. The rate structure of GST will remain the same with four rates – 5%, 12%, 18% and 28%. Now in the next meeting of the GST Council, the 28 % rate will be replaced by 40%.
A change in a clause of the model GST Bill inserting “not exceeding 14%” with “not exceeding 20%” is enough to accommodate the revision in rate.
Raising the ceiling will help both the centre and states to raise duties on certain commodities to check their consumption and or production. An upper ceiling of 40% doesn’t mean that all the commodities in the group will be taxed at this high rate. Rather the rate can be varied within.
The GST Council is about to meet on 4th and 5th of this month to finalize the changes before the Bill is expected to be passed at the Parliament in the session starting on March 9th.