Skip to main content

Govt all set to hike GST cess on luxury cars, via ordinance

Govt all set to hike GST cess on luxury cars, via ordinance
The ordinance will allow the government to hike GST cess on luxury cars and SUVs to restore tax revenue from the auto industry
The government is set to promulgate an ordinance within weeks, allowing an increase in goods and services tax (GST) cess on luxury cars and SUVs, as it seeks to restore tax revenue from the automobile industry that unintentionally got affected in the transition to the new indirect tax regime.
A person aware of the discussions in the finance ministry said on condition of anonymity that a cabinet note is being moved proposing changes to the schedule of cess levied under the GST (Compensation to States) Act, 2017, to correct the reduction in tax burden on cars due to GST rollout.
The GST Council, however, has taken the view that tax rate revisions during the transition to the new indirect tax system that kicked in from 1 July will be limited only to correcting unintentional effects of the tax rate fixing exercise.
The finance ministry on 7 August said the Council chaired by finance minister Arun Jaitley had recommended to the central government to move legislative amendments needed for raising the maximum ceiling of cess that can be levied on motor vehicles including sports utility vehicles (SUVs) to 25% from the present 15%.
The move to issue an ordinance suggests the urgency with which the government would like to bring into effect an increase in the cess.
“Only after the ordinance has been passed, the Council can decide what should be the quantum of increase needed. The outer limit suggested is 25%,” said the person.
The Council will also consider at its next meeting, on 9 September in Hyderabad, any other issue coming up from the experience of GST payment and filing of returns, as well as suggestions coming up during the meeting of chief commissioners of Central Board of Excise and Customs (CBEC) in the first week of September.
Makers of SUVs and luxury cars have criticized the GST Council’s plan to raise the cess, warning the move will lead to production cuts and job losses and dent the 
“Make in India” initiative. “Businesses have to realize one thing. The Council’s effort was to keep tax rate fixation as revenue neutral as possible. This (reduced tax burden on cars) is an unintended mistake that needs to be corrected. Where the reduction is intentional, there is no rate revision,” said the person cited above, adding that the Council consciously kept GST rates lower on many items so that the common man benefits from the new tax system.
“We need to accept, while introducing a major tax reform like GST, there would be cases where GST rates could be more or less than erstwhile taxes in a few cases and if it is so due to a process of rationalization, we need to leave them as it is,” suggested R. Muralidharan, senior director, Deloitte India.
The Hindustan Times, New Delhi, 21st August 2017


Popular posts from this blog

RBI minutes show MPC members flagged upside risks to inflation

RBI minutes show MPC members flagged upside risks to inflation Concerns about economic growth and easing inflation prompted five of the six monetary policy committee (MPC) members to call for a cut in the repo rate, but most warned that prices could start accelerating, show the minutes of the panel’s last meeting, released on Wednesday. The comments reflected a tone of caution and flagged upside risks to inflation from farm loan waivers, rise in food prices, especially vegetables, price revisions withheld ahead of the goods and services tax, implementation of house rent allowance under the 7th pay commission and fading of favourable base effect, among others. On 2 August, the panel chose to cut the repurchase rate—the rate at which the central bank infuses liquidity in the banking system—by 25 basis points to 6%. One basis point is one-hundredth of a percentage point. Pami Dua, professor at the Delhi School of Economics, wrote that her analysis showed “a fading economic growth outlook, as …

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…

Differential Tax Levy under GST: Food Firms May De-Register Trademarks

Differential Tax Levy under GST:Food Firms May De-Register Trademarks The government’s decision to charge an enhanced tax rate on trademark food brands is leading several rice, wheat and cereal manufacturers to consider de-registering their product trademarks. Irked by the June 28 central government notification fixing a 5 per cent goods and services tax (GST) rate on food items packaged in unit containers and bearing registered brand names, the industry has made several representations to the government to reconsider the differential tax levy, which these players say is creating an unlevel playing field within these highly-competitive and low-margin industries. Sources say that the move has affected the packaged rice industry the hardest and allowed the un-registered market leaders, India Gate and Daawat, to gain advantage as compared to other registered brands such as Kohinoor and Lal Qilla. Smaller players are even more worried with this enhanced rate of tax (against the otherwise …