GST Council caps cess on demerit goods at 15%

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"If a luxury vehicle at present has 40 per cent total tax, then under the new GST regime, there will be GST of 28 per cent plus the cess to keep the tax incidence level at the same level", said Finance Minister Arun Jaitley.

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

GST, which will replace a plethora of central and state taxes, is a consumption-based tax levied on sale, manufacture and consumption on goods and services at a national level.

This is the 12th meeting of the GST Council.

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Explaining the tax structure, he said, "If a luxury auto 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". Officers had already done the groundwork, The drafts were already circulated. "The SGST law now will be taken by the respective state governments through its cabinets to the respective state assemblies", he said.

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 GST Council on Thursday chose 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 approved maximum cess which could be imposed on luxury cars, tobacco, aerated drinks and pan masala among others to raise money to compensate states for loss of revenue when the new tax is rolled out from July 1. For this, the next meeting has been called on March 31.

The draft of all five laws will now be sent to the Cabinet for approval and then to the Parliament, which is currently in session, for the final nod.

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Addressing the "CII Delhi State Annual Session" today, Deputy Chief Minister Manish Sisodia said he wants to set up the cell in coordination with the Confederation of Indian Industry (CII) to help small traders "understand" GST which is expected to come into effect from July 1. "They can do it either under bond and not pay tax or they can pay IGST and take refund", the official said.

The GST council has meet from time to time to resolve the issues regarding the implementation of the pan-India tax regime.

PwC India Indirect Tax Leader Pratik Jain said, "It is also good to see a capping on cess at 15 per cent along with clear statement that cess will apply only on select commodities".

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