Peak rates on luxury goods fixed

The GST Council on Thursday decided 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. This makes the July 1 rollout date more achievable.

However, on pan masala and tobacco, the cess caps were a high 135% and 290%, respectively.

Finance Minister Arun Jaitley said the capping of cess was done at a higher rate only to give the Goods and Services Tax Council more headroom in the future if there was a need to increase them.

He said the actual rate of cess remained at 12% for luxury and sin goods for now.
Of the five pieces of supporting GST legislation cleared by the Council so far, four – central GST (CGST), integrated GST (IGST), union territories GST (UTGST) and compensation laws – will now move to the cabinet for its approval and will then be introduced in Parliament for passage.

The state GST (SGST) laws will simultaneously go to state cabinets and their legislatures.
“We will try and get the supporting laws passed by Parliament expeditiously. I hope the states will also try to get their laws cleared by Assemblies expeditiously,” Jaitley told reporters after the council meeting. The government is expected to pass these GST laws in the ongoing Budget session itself to enable the rollout of the new, unified system of taxation by July 1.

There are only four items on which the cess has been imposed. These are luxury cars, aerated drinks pan masala and tobacco. In the case of luxury cars and aerated drinks, the usual rate is 12% and the peak cess rate or cess cap is 15%. On pan masala, it is 135% and on tobacco 290%.

There is no cess on bidis as of now. But Karnataka opposed this proposal and demanded that bidis should not be exempted.

Karnataka Agriculture Minister Krishna Byre Gowda, who represented the state at the GST Council meeting, said the state will call a special session or advance the Assembly session to pass SGST before June-end.