Government introduces bill on GST compensation cess in Lok Sabha

The government today introduced a bill in the Lok Sabha that would replace an ordinance wherein tax rates on various motor vehicles were hiked to a maximum of 25 per cent under the Goods and Services Tax (GST).

Finance Minister Arun Jaitley introduced the GST (Compensation to States) Amendment Bill, 2017.

An ordinance to hike the GST cess on a range of cars from mid-size to hybrid variants to luxury ones to 25 per cent was issued in September. The bill would replace the ordinance.


Explaining the details, Jaitley in the bill's Statement of Objects and Reasons said the GST Council meeting on August 5 had recommended a 10 per cent increase in the maximum rate at which compensation cess can be collected on certain motor vehicles.

The tax rate was to increase to 25 per cent from 15 per cent.

In this regard, the maximum rates were to be increased immediately by amending the GST (Compensation to States) Act, 2017 before the next meeting of the GST Council that was scheduled for September 9. This was to ensure that the "cushion in maximum rate for compensation cess for such motor vehicles was available at the said meeting," the statement said.

As Parliament was not in session at that time and considering the extraordinary urgency of the situation, the ordinance was promulgated on September 2, it added.

According to the statement, the Act was enacted with a view to provide for compensation to the states for loss of revenue arising on account of implementation of the GST.

Last week, the Cabinet had cleared the bill to replace the ordinance.