'Hike GST rate by 1-2%, do not levy cess'

By

Maverick Martins

Published
Nov 2, 2016

Industry chamber Assocham has made a pitch to Finance Minister Arun Jaitley not to levy cess, but hike GST rate by 1-2 per cent to garner additional resources to compensate states for any revenue loss on rollout of the new regime from April next year.
 

At the GST Council meeting last month, the Centre had proposed a four-tier GST rate structure of 8 per cent, 12 per cent, 18 per cent and a peak rate of 26 per cent, which will mostly apply to FMCG and consumer durables. Moreover, a cess is also likely to be levied on demerit or sin goods and polluting items.
 
In a letter to Jaitley, Assocham Secretary General D S Rawat said that even if multiple rates are accepted by the GST Council, additional cess should not be made applicable as this would lead to distortion and cascading of taxes.

"The idea of levying cess in order to make a corpus for compensation to states does not seem to be feasible. The additional revenue required for such compensation can be collected by increasing the tax rates (by 1-2 per cent) instead of levying a cess," he said.
 
The suggestion, however, is at variance with Jaitley's contention, who had favoured levy of cess on tobacco and luxury products to compensate states, saying the cost of funding that through an additional tax would be "exorbitantly high and almost unbearable".

The GST Council, which has Union Finance Minister and his state counterparts, will decide on tax rates at its meeting on November 3-4.