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Home » Economy » Highest 28% GST on luxury, sin goods to continue: Revenue Secretary

Highest 28% GST on luxury, sin goods to continue: Revenue Secretary

Addressing the industry leaders, Bajaj said the rate rationalization exercise of the GST Council is a result of introspection of GST, five years after its rollout, and the policymakers do not have a ''fetish'' to raise the tax rates to the revenue-neutral level of 15.5 percent.

By Newsd
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The government intends to continue with the top GST slab of 28 percent for luxury and sin goods, but is open to discussing narrowing down the three slabs of 5, 12, and 18 percent into two, Revenue Secretary Tarun Bajaj said on Monday.

Addressing the industry leaders, Bajaj said the rate rationalization exercise of the GST Council is a result of introspection of GST, five years after its rollout, and the policymakers do not have a ”fetish” to raise the tax rates to the revenue-neutral level of 15.5 percent.

On the industry demand for bringing petroleum products under GST net, he said since fuel constitutes a larger part of their revenues, both the Centre and states have some apprehension. ”We will have to wait for some time.” ”Of the 5, 12, 18, and 28 percent, we would have to continue with 28 percent because in a developing economy, in an economy with so much income disparity, there would be some luxury and sin items that would and should attract a higher rate of taxation. ”But, whether on 5, 12 and 18 (percent), we can bring down to 2 rates to start with and then see how the country grows and whether there is a capacity to bring it to one rate or not is something to be seen. It is a very difficult challenge,” Bajaj said at an Assocham event. Under the GST, a four-rate structure that exempts or imposes a low rate of tax of 5 percent on essential items and a top rate of 28 percent on cars is levied. The other slabs of tax are 12 and 18 percent. Besides, there is a special 3 percent rate for gold, jewelry, and precious stones and 1.5 percent for cut and polished diamonds. Also, a cess is levied on the highest tax slab of 28 percent on luxury, sin, and demerit goods. The collection from the cess goes to a separate corpus — Compensation fund — which is used to make up for revenue loss suffered by the state due to the GST rollout. The GST Council has set up a Group of Ministers (GoM), under Karnataka Chief Minister Basavaraj Bommai, to suggest rationalization in tax rates, merging of slabs, reviewing the exempt list, and correcting duty inversion in cases where taxes on final output in lower than that in inputs. The GoM has been given 3-month more time to submit a final report.

As per an RBI study, the weighted average tax rate under the Goods and Services Tax (GST) has come down to 11.6 percent, from 14.4 percent at the time of its launch. The revenue-neutral rate under the GST should be about 15.5 percent, as per the Subramanian Committee report, submitted before the GST launch. The GST Council, based on the interim GoM report last month, had removed tax exemptions on a host of items, including pre-packed and labeled wheat flour, paneer, curd, and lassi while correcting inverted duties on items like LED lamps, solar water heaters. ”We keep talking of RNR at 15.5 percent and the present rate being 11.6, may be gone up to 11.8 or 11.9 percent with inverted duties being removed. What is it? are we looking at we should reach a rate of 15 percent? I do not think there is any fetish in the minds of policymakers that we have to reach that particular rate,” Bajaj said. The secretary said this is the time after five years to introspect and see how the GST rate structures have panned out, whether there is a need to lessen the number of rates than what they presently are, and what are the commodities that can go into higher rates and which can come into lower rates.

”I think, we as policymakers and states now are looking at GST from this eye and not having this objective that I have to somehow increase rates in some commodities to reach that 15 percent odd rate,” Bajaj added.

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