Goods and Services Tax – GST – By: – Dr. Sanjiv Agarwal – Dated:- 9-8-2017 Last Replied Date:- 9-8-2017 – We all know that compensation cess has been introduced in GST with the sole objective of collecting revenue (not tax) in the form of a compensation cess to augment the resources to meet out any tax deficit which may be payable to states in the event of any State having a short fall of tax revenue in GST regime as per agreed formula. The likely hood of such shortfall was also estimated and accordingly compensation rates were decided, notified on select items as per the scheme of law. All vehicles on which cess was notified, flat rate of 15 percent had been fixed which resulted in all vehicles getting cheaper in final price- some with sm
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e down and such rate fixation had been done with considerable discussions and after a lot of thought process was involved. Government has now have a afterthought that why should the prices be lowered on such items and therefore, come out with an idea that compensation cess should be enhanced from 15% to 25% (by 10%) on select vehicles (luxury and SUVs) so that prices such vehicles do not become cheaper than in the earlier taxation system. We all know that after GST was introduced w.e.f. 1.7.2017, the overall tax incidence on motor vehicles come down as compared to the pre GST tax regime (see table below): Segment Excise CST VAT Infrastructure Cess Luxury cess Total pre GST rate GST Cess Effective GST Change Two / three wheelers 12.5 2 13.5
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g capacity, mid segment / large cars, hybrid cars and SUVs. While GST Council and the Central Government has all powers to do so, there are few questions to be addressed. It was a Council's decisions taken with full conscience in meeting dated 18 May, 2017 that compensation shall be met as per the cesses decided. Then why to tinker so early only to see that lower prices are not desirable. Tinkering with rates so frequently would result in anarchy and unjust enrichment. Does it not amount to profiteering on the part of Government which expects taxpayers to be just and fair to customers and has anti profiteering clause in place. Will such a decision shake the faith of trade & industry in the Government and its tax policies affecting s
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