GST Council hikes cess on large cars, SUVs, slashes rates for 30 common use items
Hyderabad/New Delhi: The goods and services tax (GST) Council on Saturday raised the cess on mid-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, which met in Hyderabad, also reduced the GST rate on about 30 commonly used products like dosa batter and rain coats 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 the other items on which tax rate has been reduced.
Finance minister Arun Jaitley, who briefed reporters after the meeting said that there is 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 percentage points, large cars by 5 percentage points and SUVs by 7 percentage points. Even after the increase, the effective tax burden will be less than the pre-GST levels, the minister 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 a headroom for increasing by ten 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. “Even if the rumoured cess hike of 10% was not concluded, prices will go up again, which is disappointing. We will need to study the impact of this hike on buyer sentiment.”
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. As per Saturday’s decision, the 5% tax is applicable on food items sold in packages if they had a brand name as on 15 May or have a mark or name on which the producer is entitled to make an actionable claim, explained the minister.
The council also decided to exempt handicraft makers below Rs20 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. Several state finance ministers expressed dissatisfaction on the performance of the IT backbone of the new tax regime.
“The extension of the filing deadlines was essential for industry as there were many technical and systems issues relating to filing returns,” 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. This is move should help all segments in growth,” said Abdul Majeed, partner and national auto practice leader, PWC.
Amrit Raj contributed to this story.