Published: Fri, March 17, 2017
Business | By Megan Pierce

GST Council caps cess on demerit goods at 15%

GST Council caps cess on demerit goods at 15%

The GST Council chaired by Union Finance Minister Arun Jaitley on Thursday approved the drafts of the remaining two key laws namely - State GST and Union Territories GST.

"We have kept a sufficient buffer (for deciding on the fitment) to ensure we can meet the 1 July rollout date", Jaitley said.

Asserting that the implementation of the GST bill will be from July 1, FM Jaitley said that the tax rates for various goods and services will be taken up after framing the rules.

The progress made towards rolling out the Goods and Services Tax (GST) is encouraging but implementing the new tax regime on July 1 will be hard as the industry may not have sufficient time to prepare itself, said Sachin Menon Head-Indirect Tax, KPMG. Jaitley said that tax rates for various goods and services will be considered after rules preparation.

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

He said the Council has granted formal approval to all five legislations after the Council's 12th meeting on Monday and the final drafts of the three other Bills - Integrated GST (IGST), Central GST (CGST) and Compensation Bill - had been cleared by the Council in its previous meetings as well.

The Finance Minister has stated that the SGST will now be taken to respective state assemblies for approval.

The 15 per cent cess cap would apply on luxury cars and aerated drinks.

Giving an example, he said if a luxury vehicle at present commands a total tax of 40 per cent, under the new indirect tax regime, a GST of 28 per cent plus 12 per cent cess would be levied to keep the tax incidence at the same level.

Union finance minister Arun Jaitley talks to West Bengal finance minister Amit Mitra (centre) and Puducherry chief minister V Narayanasami at the GST Council Meeting in New Delhi on Thursday.

The council has taken a tough stand on the pan masala consumption, and has capped the cess at 135 per cent ad valorem.

Mr Jain also said the roll-out time line still seems tough as the rules are still to be finalised and rates are to be determined over next couple of months.

He said the five sets of already approved regulations might require "marginal corrections" in view of the legislations which have been finalised by the Council.

The GST Council will consider and approve those regulations in the next meeting on March 31.

"Now, we will have the same treatment for any supply made to SEZ as it is made in case of exports". Procurement of supplies by SEZs will be zero-rated. Earlier, we had said that they will first pay the tax and then the SEZ unit will get refund. The actual cess on these items will be decided later but the cap has been provided in the draft legislation, the sources said.

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