GST council clears up to 15 per cent cess on luxury cars

NEW DELHI: NEW DELHI: The GST council on Thursday agreed on fixing the ceiling on cess that would be imposed under the new regime to fund compensation to states for any revenue loss, with luxury cars and water containing sugar facing up to 15% levy on top of the 28% GST rate.

Packaged drinking water and mineral water, which does not contain sugar, will not be subjected to cess.

The council has opted to levy cess on five category of products - pan masala, chewing tobacco and cigarettes, luxury cars, aerated drinks and mineral water, and coal and lignite - to create a fund with a corpus of around Rs 50,000 crore for meeting a potential liability.

The council has, however, kept the option of adding more items to the list later.

While the exact cess would be decided by the GST council when the rates are finalised, FM Arun Jaitley told reporters that the states and the Centre had given them selves headroom for the levy.

"The council will decide the exact levy. What we have cleared today is the ceiling," revenue secretary Hasmukh Adhia said. This means at this stage it would be difficult to assess which products would become expensive or cheap.

The cess would be applicable for five years, the period for which the Centre has committed to compensate the states for potential revenue losses. This period can be extended by the GST council. At the same time, all other cesses would be subsumed into GST.

The government had earlier said the cess was likely to be in line with the current levy of central excise and VAT to ensure that there is no re venue loss to states. At the same time, the states and the Centre want to ensure that they should be able to raise the cess if required, but that would require clearance of the GST council.



In case of tobacco, however, the government has armed itself with an enormous cushion. A government officer said currently the levy works out to around and the GST council has decided to allow for cess of up to 290% in addition to another possible levy of Rs 4,170 per 1,000 sticks.

Similarly , in the case of pan masala, a cushion has been built in, but it is lower than tobacco.