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GST Council hikes cess on luxury cars, 30 daily-use items now cheaper

Finance minister Arun Jaitley said there was no change in the GST cess on small petrol and diesel cars, hybrid cars or on 13-seater vehicles

business Updated: Sep 10, 2017 10:00 IST
Yunus Lasania and Gireesh Chandra Prasad
Yunus Lasania and Gireesh Chandra Prasad
Livemint, Hyderabad/New Delhi
Minister of Corporate Affairs Arun Jaitley at the 21st GST Council meet in Hyderabad on Saturday. (PTI Photo)

Federal indirect tax body, the Goods and Service Tax (GST) Council, on Saturday raised the cess on medium sized-to-large cars and SUVs in the range of 2-7 percentage points but kept the tax burden lower than pre-GST levels.

The council also reduced the GST rate on about 30 commonly used products like dosa batter and raincoats as it sought to pass on benefit of better than expected revenue receipts under the two-month-old tax regime to the consumer. The revised rates including the cess will be effective from the date they will be notified. Dried tamarind, custard powder, disposables and rubber bands are among other items on which tax rate has been reduced.

Finance minister Arun Jaitley said there was no change in the GST cess on small petrol and diesel cars, hybrid cars or on 13-seater vehicles. The cess on mid-segment cars will go up by 2, large cars by 5 and SUVs by 7 percentage points. The effective tax burden will be less than the pre-GST levels, he explained.

“The council decided that it is only in large vehicles, affordability of consumers is high. Accordingly, the cess has been increased by two, five and seven percentage points. Even then, the pre-GST rate has not been restored even though we had headroom for increasing by 10 percentage points,” said Jaitley.

The government had on 4 September authorized the Council to raise the cess on cars attracting 15% cess to a maximum of 25% through an Ordinance.

Rahil Ansari, Head, Audi India said taxes on the automobile sector were already very high and that the industry expected its unfulfilled potential to increase after the implementation of GST and rationalization of taxes.

The Council also expanded the ambit of the 5% GST on branded packaged food items to include those products which were earlier sold under a brand name but the producers chose to abandon their trade marks to escape the tax.

The Council also decided to exempt handicraft makers below ?20 lakh sales and sell in other states from the need to take temporary registration. Khadi fabrics sold through Khadi and Village Industries Commission will be exempt from 5% GST.

The Council also decided to give extra time to file various tax returns for the month of July in view of the technical glitches in the return filing process.

As per the revised return filing schedule decided by the Council, the last date for filing GST return 1 dealing with supplies made by companies that was to expire on Sunday, has been extended to 10 October. The Council also gave extra four months for filing a summary return for the month of July, the original deadline for which had expired on 25 August.

Acknowledging technical glitches in the system, the Council decided to set up a ministerial panel to oversee the functioning of GSTN, the company that processes tax returns.

“The extension of the filing deadlines was essential for industry as there were many technical and systems issues,” said Abhishek Rastogi, Partner, Khaitan & Co., a law firm. “The GST council took a middle path (on car cess) and benefit is provided to all categories across different segment compared pre-GST regime,” said Abdul Majeed, partner and national auto practice leader, PWC.

(With inputs from Amrit Raj)

First Published: Sep 09, 2017 22:14 IST