NEW DELHI: The Centre and the states may settle for 4% goods and services tax (GST) on bullion and opt for a special rate for financial services, amid intense lobbying from the two sectors in the run up to the rollout from July.
In addition, the GST Council — the apex decision-making body comprising state finance ministers and headed by Union finance minister Arun Jaitley — is discussing whether to include handloom and handicrafts as well as bidis in the tax net, although the house is still divided.
Sources told TOI that bidis, which are currently exempt, may be brought under the net as they are sin goods, like cigarettes, which will face a cess. Cigarette companies have been arguing for a while that bidis should also be subjected to high taxes but there is a lobby that has been making a case for keeping it out, given that thousands depend on it for livelihood.
A similar case is also being made for handloom and handicrafts, where some of the states as well as the textiles ministry is in favour of either exempting them from GST or keeping them at zero rate. But there is an equally powerful argument to ensure that GST of 5% is levied. Sources also said that in case of gold and silver the southern states are in favour of a 6% levy, considering some of them levy up to 5% VAT. In contrast, some of the western states are keen on a low levy of 1% or so. While slabs for goods were finalised by the GST Council, bullion and services were kept out of the decision.
Revenue secretary Hasmukh Adhia recently indicated that there may be two rates for services, although he refrained from disclosing the levels. Experts believe that certain services may be put in the 18% bracket with a lower levy of 12% on others.
In addition, sources said, a special dispensation may be made for financial services — such as banking and insurance — which has been lobbying with the GST Council for a simpler regime, including an exemption from state-wise registration.
The decision on rates is expected at the next meeting of the GST Council, scheduled in Srinagar on May 18 and 19, where product-specific levies are expected to be finalised along with rules that will govern the new tax regime. The commerce ministry is also keen that some of the concerns such as refund of taxes to exporters be reworked.