GST Council caps cess on demerit goods at 15%, clears all five draft bills

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 on Thursday approved a cap on cess along with supporting legislations.

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.

Giving an example, he said if a luxury car 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.

The 15 per cent cess cap would apply on luxury cars and aerated drinks. On pan masala, the cess has been capped at 135 per cent ad valorem.

Tobacco cess will be capped at a mixture of Rs 4,170 per 1,000 sticks or ad valorem of 290 per cent. Cess on coal would be at Rs 400 per ton. No decision has been taken to levy cess on bidis as of now, an official said.

The panel today also cleared the State-GST (S-GST) and Union Territory GST (UT-GST) legislations, Jaitley said while briefing reporters on the deliberations at the 12^th meeting of the all-powerful GST Council.

The panel at its last meeting approved the final draft of central GST (C-GST) and integrated GST (I-GST) laws.

The supporting S-GST and UT-GST legislations together with the GST Compensation Law will go to the Cabinet for a formal nod before they are presented in Parliament in the ongoing Budget session that ends on April 12.

The government is hoping the C-GST, I-GST, UT-GST and the GST Compensation laws will be approved in the current session of Parliament and state legislatures will soon clear the S-GST bills so that the new indirect tax regime can be rolled out from July 1.

Jaitley said the GST Council will meet again on March 31 to approve rules after which fitting goods and services in the four-slab tax structure of 5, 12, 18 and 28 per cent will be taken up.