NEW DELHI, Oct 18 - The GST Council today discussed possible Goods and Service Tax rates, including a four-slab structure of 6, 12, 18 and 26 per cent with lower rates for essential items and the highest band for luxury goods, even as it reached consensus on payment of compensation to states.
The all-powerful panel, headed by Finance Minister Arun Jaitley and having representatives of all states, reached a consensus on the way states would be compensated for any loss of revenue from implementation of the new indirect tax regime from April 1, 2017.
The base year for calculating the revenue of a state would be 2015-16 and a secular growth rate of 14 per cent would be taken for calculating the likely revenue of each state in the first five years of implementation of GST, Jaitley told reporters here. States getting lower revenue than this would be compensated by the Centre.
The GST Council on the first day of its three-day meeting discussed five alternatives of GST rate structure, he said, adding no decision was taken and discussions would continue tomorrow.
A four-slab structure of 6, 12, 18 and 26 per cent with a cess on the highest band for ultra luxury and demerit items like tobacco being levied was discussed. Food items are proposed to be exempt from the tax and 50 per cent of the items of common usage will be exempt to keep the inflation under check. The lower rates would be levied on essential items and the highest for luxury and demerit goods.
The cess would help create a compensation fund to help compensate states for any loss of revenue from implementation of the new indirect tax regime that will subsume a host of Central and state taxes including excise duty, service tax and VAT. � PTI