At a meeting of the GST Council, the Centre has proposed four slabs for the Goods and Services Tax (GST) in addition to a cess on sin and luxury goods. This will help the government raise close to Rs 50,000 crores to compensate states for any possible revenue loss under the new tax regime. The proposed slabs are of 6 per cent, 12 per cent, 18 per cent and 26 per cent along with a 4 per cent levy on gold. For environmentally sensitive items such as coal and sin goods (A sin good is that that is deemed harmful to society) such as aerated drinks, tobacco and pan masala and luxury cars and watches, a higher cess has been suggested, it is learnt.

The cess will make sure that the levy on these items is not changed and the money raised will flow into a special fund to meet compensation requirements. While the cess on coal would fetch Rs 26,000 crores annually, the tax on sin and luxury goods is expected to help the Centre mop up another Rs 24,000 crores. Although goods- or services-wise classification will only be done once the states agree to the slabs, consumer durables and a large number of FMCG products are expected to be in the 26 per cent bracket. It is said that the intent was to work out slabs in a way that the overall burden on the consumer came down.

Currently, the total levy on consumer durables added up to around 27 per cent along with another 4 per cent burden due to central sales tax (CST). Under the proposed regime, the burden will reduce to 26 per cent. It is said that nearly a quarter of the burden due to CST and octroi would be abolished while the Krishi Kalyan cess would be included in the overall GST levy. Last year, the states collected Rs 4.4 lakh crore of which CST and octroi added up to around Rs 1 lakh crore.