Skip to main content

Cabinet May Consider Ordinance On GST Cess Hike Tomorrow

Cabinet May Consider Ordinance On GST Cess Hike Tomorrow
The Centre is all set to pass an ordinance that will increase the additional cess levied on SUVs to 25 per cent from 15 per cent under the Goods and Service Tax (GST) regime at present. This will be applicable to all motor cars designed to transport 13 persons seated including the drivers, including station wagons and racing cars. Prices of most SUVs were cut between Rs 1.1 lakh and Rs 3 lakh following the implementation of GST, which subsumed over a dozen central and state levies like excise duty, service tax, and VAT from July 1.
The GST Council, the apex tax rate setting body under the GST regime, had on August 5, 2017, approved raising cess on SUV's. But, for raising the cess requires an amendment to the Schedule of section 8 of the GST (Compensation to a State) Act, 2017.
An ordinance is issued when Parliament is not in session to approve legislation or change in legislation. It has to be replaced with a proper legislation with the approval of Parliament within six months of its issuance. Views of ministries like road, transport and highways and heavy industries have also been taken into consideration.
Under GST, a cess was levied on demerit goods like cars, tobacco, and coal to create a corpus for compensating states for any loss of revenue from their taxes like VAT being unified with central levies like excise duty and service tax in the GST.
Cars attract the top tax rate of 28 per cent. On top of this, a cess of 1 to 15 per cent is levied for the creation of the state compensation corpus.
The official said that after the introduction of GST, the total tax incidence on motor vehicles (GST plus compensation cess) has come down when compared with the total tax incidence in the pre-GST regime.
To rectify the anomaly, the GST Council, headed by Union Finance Minister Arun Jaitley and comprising representatives of all states, had on August 5 recommended that the Central government move legislative amendments required for increasing the maximum ceiling of cess leviable on motor vehicles to 25 per cent from present 15 per cent.
Once the law is amended, the GST Council will decide on the date when the increased cess will be applicable, the official said, adding the next meeting of the panel is scheduled to be held in Hyderabad on September 9. The highest pre-GST tax incidence on motor vehicles worked out to about 52-54.72 per cent, to which 2.5 per cent was added on account of Central Sales Tax, octroi etc. Against this, post-GST the total tax incidence came to 43 per cent.
So, to take the tax incidence to pre-GST level, the highest compensation cess rate required is 25 per cent. Presently, large motor vehicles, SUVs, mid-segment cars, large cars, hybrid cars and hybrid motor vehicles attract a cess of 15 per cent on top of 28 per cent GST. Small petrol cars of less than 4 meters and 1,200 cc attract a cess of 1 per cent, while small diesel cars of less than 4 meters and 1,500 cc engine attract a cess of 3 per cent.
The Business Standard, New Delhi, 30th August 2017

Comments

Popular posts from this blog

Shrinking footprints of foreign banks in India

Shrinking footprints of foreign banks in India Foreign banks are increasingly shrinking their presence in India and are also becoming more conservative than private and public sector counterparts. While many of them have sold some of their businesses in India as part of their global strategy, some are trying to keep their core expertise intact. Others are branching out to newer areas to continue business momentum.For example, HSBC and Barclays Bank in India have got out of the retail business, whereas corporate-focused Standard Chartered Bank is now trying to increase its focus on retail “Building a retail franchise is a huge exercise and takes a long time. You cannot afford to lose it,” said Shashank Joshi, Bank of Tokyo-Mitsubishi UFJ’s India head.According to the Reserve Bank of India (RBI) data, foreign banks’ combined loan book shrunk nearly 10 per cent from Rs 3.78 trillion in fiscal 2015-16 to Rs 3.42 trillion last financial year. The banking industry, which includes foreign banks…

New money laundering norms stump jewellery sector

New money laundering norms stump jewellery sector Dealers with turnover of Rs 2 crore and above covered; industry says threshold too low The central government has notified the money laundering rules for the gems and jewellery sector with immediate effect. Now, any entity deals in precious metals, precious stones, or other high-value goods and has a turnover of Rs 2 crore or more in a financial year will be covered under the Prevention of Money Laundering Act, 2002 (PMLA, 2002). The limit of Rs 2 crore would be calculated on the basis of the previous year’s turnover, said the notification. The directorate general of goods and service tax intelligence has been appointed under the Act. Sources said the government’s move to apply the PMLA to the jewellery sector was a fallout of income-tax raids on jewellers soon after demonetisation last November, when it was found that they sold gold and jewellery at a huge premium and accepted old currency notes as payment. The notification, issued on Augus…

Confusion over branded food GST

Confusion over branded food GST The GST Council's statement over the weekend on applying tax on branded food items has left most of the trade confused.

Even though the Council has not changed the rates on food -0 per cent on unbranded stuff and 5 per cent on brands -many small traders who didn't levy GST earlier said they could come under the 5 per cent slab after the clarification.

While they predicted some increase in consumer prices, large players said they can absorb GST in many ways and keep prices steady.

"Trade is confused and hence on behalf of our chamber, we have asked our members to go ahead and charge 5 per cent GST," said Sushil Sureka, general secretary of the Ahilya Chamber of Commerce and Industry in Indore.

The statement clarifying the application of GST came after some businesses were found deregistering their brands and selling under corporate brand name without paying tax, after the Council exempted unbranded food from the new all-encompassing indirec…