The first official indication that India could levy Goods & Services Tax (GST) at multiple rates came from Finance Minister Arun Jaitley when he said that pollutants and environment-unfriendly items could attract GST at rates higher than the standard rate.
“The indirect tax regime that we are planning..., the rate of taxation on such products which are going to be environmentally unfriendly would be distinct from the normal rate of taxation,” Mr. Jaitley said in Panaji, ahead of the third round of deliberations of the GST Council scheduled to start on October 18. The main item on the agenda is the fixing of the rates at which the GST will be levied, collected and have to be paid across the country by consumers. The negotiations are expected to be a prolonged affair given the differences in the stated positions of the Opposition parties and the States.
While the Opposition parties led by the Congress stand united in seeking that the standard GST rate, the rate at which the new tax will fall on a majority of the goods and services, be no higher than 18 per cent, some States, such as Kerala, want it fixed at a higher level, closer to 20 per cent, to protect revenue collections.
Multiple GST rates were recommended last year by a panel headed by Chief Economic Adviser Arvind Subramanian in keeping with the view to strike a balance between the objectives of protecting revenues and minimising the burden of the GST on the poor.
Aimed at boosting funds availability for climate finance, the bid to tax pollutants at higher rates than the standard GST rate could find resonance with the Opposition.
Congress leader P. Chidambaram had, in fact, argued in favour of three GST rates while speaking on the Constitutional Amendment for the roll out of the GST in the Rajya Sabha — a standard rate, a standard-minus rate at a level below the standard rate for goods and services consumed mainly by the poor and a standard-plus rate at a level higher than the standard rate for demerit goods including luxury articles.