GST Council approves two-tier tax structure of 5 per cent and 18 per cent, effective September 22

New Delhi : The GST Council on September 3 approved a dual tax rate structure of 5 percent and 18 percent, removing the slabs of 12 percent and 28 percent, highly placed
sources told Moneycontrol. The new rate structure will be applicable from September 22
and could lead to a revenue shortfall of Rs 93,000 crore. However, the introduction of a
40 percent slab for luxury and sin goods could offset the losses by adding Rs 45,000 crore to the exchequer, people aware of the  development said. All the decisions were taken by consensus of the GST Council and voting did not take place, the sources cited above said. In addition, no decision has been taken on compensation to states for loss in revenue so far. Moreover, Punjab’s finance minister Harpal Singh Cheema said no additional tax would be levied on the 40 percent slab. “States will face revenue loss, but
we stand with our citizens. The decision has been taken in favour of the people,” he said.
Cheema’s Jharkhand counterpart Radha Krishna Kishore said the state hoped that consumption boost will offset some of the revenue shortfall. He also said the
state has demanded compensation for the revenue loss but there is no clarity so far.
“I had proposed the Central government to provide compensation for the loss, but
there is no clarity. Now it’s up to the central government how to compensate the state for the revenue loss,” Kishore said. The Council’s two-day meeting, which began on September 3, was wrapped up early and has been curtailed to a one-day event. The
56th meeting of the Council was chaired by Union finance minister Nirmala Sitharaman and attended by her state counterparts. The Council is likely to have cleared the reduction of tax rate on footwear and apparel priced up to Rs 2,500 to 5 percent,
sources told PTI. As of now, items under these two categories are taxed at 5% for goods priced up to Rs 1,000 and at 12 percent for above Rs 1,000. The Group of Ministers had
already passed the proposal to restructure the GST regime and turn it into a two-rate system of just 5 percent and 18 percent. The new changes are set to take effect from September 22, just ahead of the beginning of the festive season. Moreover, the Council is likely to exempt health insurance premiums from GST for senior citizens and slash rates for life savings drugs. The tax panel is also likely to bring health insurance premiums to a lower slab in a

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