Eight States propose cess on sin, luxury goods above 40% GST rate to protect revenues
Eight states have proposed levying an additional cess on sin and luxury goods, over and above a proposed 40% GST rate, to safeguard their revenues. This proposal comes ahead of the GST Council meeting, in response to the Centre's plan to rationalise tax slabs by removing 12% and 28% rates and moving most items to 5% and 18%. The states, all non-BJP ruled, anticipate a 15-20% revenue reduction from the Centre's rationalisation and argue for the cess proceeds to be fully distributed among them to discourage sin goods and promote public health, citing their heavy dependence on GST revenue.
Key Points
- Eight states have proposed an additional cess on sin and luxury goods beyond the 40% GST rate.
- The proposal aims to protect state revenues from potential losses due to the Centre's GST rate rationalisation plan.
- The Centre's plan includes removing 12% and 28% GST slabs, shifting items to 5% and 18%, and setting a 40% rate for some sin/luxury items.
- States argue that the cess proceeds should be fully distributed among them to compensate for revenue shortfalls and discourage consumption of sin goods.
- The states highlighted their heavy reliance on GST as a primary revenue source, contrasting it with the Centre's broader tax base.
Exam Facts
- Eight states proposed a cess on sin and luxury goods above the proposed 40% GST rate.
- The Centre proposed removing 12% and 28% GST tax slabs.
- The proposed new GST rates for most items in these slabs are 5% and 18%.
- GST revenue makes up only 28% of the Centre's tax revenue but half of the States' own tax revenues.
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