Cap on max rate likely; GST Council to have the final say

The official cited the example of the recent changes in the Customs duty for marble that has been raised to a maximum level of 40 per cent from 10 per cent earlier. “We propose to state it as ‘not exceeding’ x per cent for the GST rate in the Bill, so that neither states nor Centre can go beyond that level,” the official said.

The proposal of finance ministry will be considered by the GST Council along with other proposals of states. “It is one of the proposals. States will also send their proposals for the taxation structure and the final decision will be made by the GST Council,” another ministry official said.

The finance ministry is also looking at a three-rate structure for GST, along with a separate slab for precious metals such as gold, which is in line with the recommendations of the report on revenue neutral rate (RNR) for GST by the committee headed by Chief Economic Adviser Arvind Subramanian. The report had suggested a three-tier structure of low rate for goods, standard rate on most goods and high rate on demerit goods. The panel had recommended a RNR of 15-15.5 per cent, standard rate of 16.9-18.9 per cent and a high rate of 40 per cent for demerit goods under the proposed GST regime.

The government had earlier rejected the Congress’ demand to cap the GST rate at 18 per cent in the Constitution Amendment Bill. “The cap was not placed at that stage as it would have been difficult to make changes to the Constitution again and again,” the official added.

The government expects to introduce the two enabling legislation for GST, Central GST (CGST) and Integrated GST (IGST), in the Winter Session of Parliament. Earlier this month, finance minister Arun Jaitley in his media briefing after the clearance of the Constitution Amendment Bill in Rajya Sabha had responded to a query mentioning of GST rate in the Central GST by saying, “Where is the rate going to be mentioned, once we pass the Constitution amendment, which puts this drafting of the law in the first instance in the domain of the GST Council, now without the first draft approved by the Council before me, how can I commit as to what the nature of that draft and what the content of the rate itself would be and therefore on a presumptive basis, for me to say, as to what will be the nature of that law would not be fair.”

The Constitution (122nd Amendment) Bill is now awaiting ratification by 14 state Assemblies, with Assam and Bihar Assemblies already ratifying it. A minimum of 16 of 31 state Assemblies, including Union territories of Delhi and Puducherry need to ratify the Bill and the government expects to complete this process within a month. After the ratification and the Presidential assent, a GST Council with representatives from the Centre and states will be formed within 60 days of the enactment of the Bill.