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GST - (1) The Multi Rate Structure and (2) Compensation Payable Through Cess

News and Press Release - Dated:- 27-10-2016 - From the facebook page of Mr. Arun Jaitley Two Important Issues before the GST Council The GST Council comprising of the Finance Ministers' of the Union and the State Governments has had three detailed meetings spread over several days. Two more meetings are proposed post Deepawali. The meetings have witnessed an intense debate on several issues, which has been an excellent example of deliberative democracy . Opposing viewpoints have ended up in .....

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four slab multi-rate tax structure. Items constituting nearly 50% of the weightage in the Consumer Price Index basket (mainly food items), are proposed to be exempted from the levy of the GST. There will be a zero tax on such items. The object of this is to ensure that the GST structure is not regressive or burdensome on the common man. Of the balance items, a tax rate of 6%, 12%, 18% and 26% has been suggested. The principal rationale behind this tax structure is that items which are presently .....

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ity is that a multiple tax rate in India is inevitable for several reasons. Different items used by different segments of society have to be taxed differently. Otherwise the GST would be regressive. Air conditioners and hawai chappals cannot be taxed at the same rate. Total tax eventually collected has to be revenue neutral. The Government should not lose money necessary for expenditure nor make a windfall gain. The tax on some products in a narrow slab regime will substantially increase. This w .....

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%. It has been proposed to the Council to fix the rate of these items at 26%. Some of the items which are now being used by the lower middle classes will eventually be proposed to be shifted to the 18% bracket. With regard to demerit and luxury goods which are taxed globally at a higher rate, no rebates are contemplated. Each good would be taxed on the basis of its own demerit. The gains of GST would necessarily involve that there would be a seamless transfer of goods and services across the cou .....

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resolved. Hopefully with higher compliances and more revenue after the initial period, the GST Council would continue to have a look at the expenditure requirement and the tax likely to be collected and rationalise the tax rates and the structures in future. It may be noted that some developed countries which do not have any section of the population below the poverty levels and where economic standards are high, have fewer tax slabs but many of them have 3-4 slabs. I am annexing to this blog a .....

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r compensation to these States. The moot question is as to how is this to be funded by the Central Government? If the Central Government has to borrow money to fund the compensation, it would add to its liability and increasing the cost of borrowing by the Centre, the State Governments and the private sector. There is no rationale for increasing direct tax for this purpose. Theoretically it has been argued that the compensation be funded out of an additional tax in the GST rather than by cess. A .....

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