State GST and Union Territory GST get council's nod

The actual cess on demerit goods, which will help create a corpus for compensating states for any loss of revenue from GST implementation in the first five years, may be lower than the cap as the Council has kept a "little" headroom for future exigencies, Finance Minister Arun Jaitley said. "I hope the states will also try to get their laws cleared by Assemblies expeditiously", Jaitley told reporters after the council meeting.

Government sources said the GST legislation is likely to be taken up as money bills during the budget session, which restarted on 9 March after a month-long recess.

A maximum of 15 per cent cess on top of the peak GST rate of 28 per cent will be levied on luxury goods and aerated drinks after the GST Council today approved a cap on cess along with supporting legislations. The Council will now be discussing the formulation of rules that will govern the new tax, Jaitley said, adding that the committee will be meeting again on March 31 to approve four of those regulations while it will also consider the changes to five others that were approved earlier.

A similar 15 per cent cess cap has been approved for aerated drinks as well, and Revenue Secretary Hasmukh Adhia said that any other item that the Council decides to bring into the remit of the cess subsequently would attract the same ceiling rate of 15%.

Four of the proposed laws (except the state GST bill) will now be tabled together in the Lok Sabha after getting the Union cabinet's approval.

The GST Council on Thursday approved the two remaining supplementary bills - State GST (SGST) and Union Territory GST (UTGST) - meaning that formal approval has now been granted to all five draft laws. "The SGST law now will be taken by the respective state governments through its cabinets to the respective state assemblies", he said.

Cess capped at 15 percent for luxury cars and aerated drinks.

The GST council had so far approved the law related to legislation, payment, refunds, invoices, returns in their previous meeting.

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).

Once the rules and regulations are approved by the council, the most crucial issue of assigning tax slabs to various commodities would be up for approval. For this, the next meeting has been called on March 31.

Any supply made to SEZ will be zero rated.

The council also decided to make the tax treatment of items produced in special economic zones (SEZs) similar to that on exports. Now, it has been agreed that in case of physical export or anybody supplying goods to SEZ, the same methodology will apply. "It will be too short a time for the industry for preparation if the states are not passing GST law latest by second half of April", said Sachin Menon, national head (Indirect Tax), KPMG in India.

  • Anthony Vega