GST: Jaitley says yes to cess, no to additional tax for compensating states

The two important issues are - the Multi Rate Structure and Compensation Payable Through Cess

Ahead of the GST Council meet next week, Finance Minister Arun Jaitley said the 4-slab structure of 6, 12, 18 and 26 per cent was under consideration, with lower rates for essential commodities and higher bracket for luxury goods.

Jaitley, in a Facebook post said he prefers a levy of cess on tobacco and luxury products to compensate states for loss of revenue on GST. Jaitley said if the central government has to borrow money to fund states' compensation, it would add to its liability and increase cost of borrowing for the Centre, state governments and the private sector.

Alternatively, Jaitley said if cess is levied, states which benefit out of GST roll out do not have to compensate the losing states.

Here is the full text of Jaitley's explanation: