Finance Minister Arun Jaitley with Ministers at the 3rd meeting of the GST Council. (PTI Photo)
Adding a new wrinkle to the government's plans to introduce the nationwide Goods and Services Tax or GST in April, a crucial meeting called on Tuesday ended without a breakthrough on basics - like the rate of tax that will apply to different categories.
The Finance Ministry has proposed four tax slabs, with the highest at 26 per cent for about 20-25 per cent of taxable items. Other slabs included 12 per cent for food and fast-moving consumer goods (FMCG), and 6 per cent for precious metals like gold and for essential items.
"Worst fears confirmed. #GST to be regressive. Tax on luxuries to be reduced to 26%. #Tax on necessities to be raised to 12%," tweeted Kerala's Finance Minister Dr Thomas Issac on Tuesday.
The GST, described as India's biggest tax reform, replaces a jumble of state and central levies. Finance Minister Arun Jaitley is keen on finalising a deal with state governments at the three-day session that began today so that the proposed rate of tax can be submitted to parliament when it meets next month.
"Both states and the centre must have adequate revenue to discharge obligations with least burden on the tax payer," said Mr Jaitley on Tuesday.
Last month the GST Council, a decision-making body that comprises Mr Jaitley and state finance ministers, resolved key issues on how the sales tax would work and approved draft rules for its collection.
Some states have also objected to the fact that 11 lakh businesses that currently pay service tax will continue to be assessed by the centre, which has responded that over time, official in states will be trained to take over.