GST Rate: Maximum rate of GST can be increased to 60%, know what is the plan

The Group of Ministers (GoM) formed on Compensation Cess has agreed on the proposal to merge Compensation Cess into GST rates. This will ensure that even after the removal of the cess, there will be no change in tax on high revenue items like automobiles, tobacco and aerated drinks.

Highest rate of GST can be increased to 60 percent. It is currently 40 percent. The main reason for this is the expiry of compensation cess. It will expire on April 1, 2026. Many government sources gave this information. The GST system was implemented on July 1, 2017. Then the compensation cess was started to compensate the states for the loss of revenue due to the GST system.

Consensus has been reached in the GoM

The Group of Ministers (GoM) formed on Compensation Cess has reached a consensus on the proposal to merge Compensation Cess with GST rates. Even after the removal of this cess, there will be no change in tax on high revenue items like automobiles, tobacco and aerated drinks. A government source said, “The cess cannot continue after March 2026. Therefore, the rates will have to be increased to prevent the reduction in revenue. This will require amendments, because at present GST cannot be imposed at more than 40 percent. It can be increased to 60 percent.”

Compensation cess is levied in addition to the GST rate

GST compensation cess is levied in addition to the maximum standard rate of 28 percent. This cess is levied on sin products and luxury goods. The government had taken a loan to compensate the states for the losses incurred due to the GST system. Compensation cess was introduced to repay this loan. Currently, the highest rate of GST can be 40 percent. However, this rate has not been used yet. Due to compensation cess, the tax on many items is already very high.

Compensation cess is levied on these items

Compensation cess is levied on many items including SUVs and aerated drinks. Its rate on SUVs is 22 percent, while it is 12 percent on aerated drinks. The rates of compensation cess are different on tobacco and other such products. By imposing compensation cess on cigarettes, the total tax increases to 55-60 percent. The cess is calculated based on the taxable value of the goods and in some cases, on its quantity.

Decision may be taken in the next meeting of GST Council

The decision on compensation cess may be taken in the next meeting of GST Council. The date of the next meeting has not been decided yet. But, it is expected that the GST Council meeting will be held before the monsoon session of Parliament.

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