Published: Fri, March 17, 2017
Money | By Oscar Reynolds

GST Council caps cess on demerit goods at 15%

GST Council caps cess on demerit goods at 15%

At the conclusion of the 12th GST council meeting, finance minister Arun Jaitley said the council had now granted its approval to all the five legislations, clearing the way for these bills to be tabled in Parliament and the state assemblies.

This move let all the five enabling draft bills as approved, enabling the roll out of the new indirect tax regime by July 1.

The panel at its last meeting approved the final draft of central GST (C-GST) and integrated GST (I-GST) laws.

The government hopes to implement the GST tentatively from July, said the minister.

The GST Council on Thursday made a decision to cap the cess on luxury and sin goods at 15% taking the peak GST rate at 43% for these items even as it cleared all supporting laws.

The GST council also agreed to cap the cess on various so-called demerit (or sin and luxury) goods in the legislation.

Previous year in August, the Rajya Sabha cleared a bill that amended the Constitution to enable India's biggest tax reform - GST.

The GST Council has approved rules and regulations on registration, payments, refund, invoice and returns, but these may require minor corrections, Jaitley said.

The GST council has broadly approved the four-slab structure of 5 per cent, 12 per cent, 18 per cent and 28 per cent.

The council's approval for the state GST and Union territory GST bills marks an important step in India's long journey towards creating a unified market, and is critical to meeting the deadline of 1 July for GST implementation.

Meanwhile, the SGST draft law will have to be approved by the legislative assemblies of Delhi and Puducherry. So, beyond the highest GST slab of 28 per cent, aerated drinks, luxury cars and luxury goods will have additional 15 per cent cess.

For pan masala, which now face an effective tax rate of about 135 per cent, the ceiling on cess has been kept at 135 per cent on an ad valorem basis (value of the product). "We will maintain roughly the same leek of tax incidence as it applies today", a finance ministry official said. "Not an extraordinary headspace, but only a marginal headspace", Arun Jaitley said after the meeting.

With regard to taxation of SEZ under the GST regime, an official said it would be "zero rated at par with exports". Earlier, we had said that they will first pay the tax and then the SEZ unit will get refund.

KPMG (India) National Head, Indirect Tax, Sachin Menon said clearance of the model GST law is warning bell for those who have not yet commenced their preparations for introduction of GST.

"The cess is to be levied on four or five commodities and the caps have been approved by the Council".

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