Levying cess on more items other than demerit and luxury goods to compensate states for revenue loss post GST rollout will not be a prudent move as it will only increase the anomalies in the new indirect tax regime, experts said.

Deloitte Haskins & Sells LLP Senior Director (Indirect Tax) M S Mani, however, said, “it will not be a prudent move” to levy cess on any new item, other than the four items that were agreed in the past.

Levying cess on more items other than demerit and luxury goods to compensate states for revenue loss post GST rollout will not be a prudent move as it will only increase the anomalies in the new indirect tax regime, experts said. Besides, the GST Council hearing out concerns of specific industry representatives is a welcome move, they said, adding suggestions like centralised registration and single assessing authority would be favourably considered by the Council.

“There are several open issues for the services sector and the industry would hope that these are addressed in the final legislation. However, the key issue of ‘dual control’ was not taken up which really is the crux of the contention. Any movement forward would be contingent upon the agreement on this issue,” PwC India Partner and Leader Indirect Tax Pratik Jain said.

Services sectoral presentation before the Council was another welcome move, it’s important the Council recognises the issues specially around centralised registration besides other, EY India National Leader (Indirect Tax) Harishanker Subramaniam said.

Deloitte Haskins & Sells LLP Senior Director (Indirect Tax) M S Mani, however, said, “it will not be a prudent move” to levy cess on any new item, other than the four items that were agreed in the past.

“It must be noted that the concept of a cess in the GST framework, is in itself an anomaly, and it is hoped that the anomaly does not get further accentuated in order to collect more revenues to fulfil the compensation obligation,” Mani said.

As many as six sectors including IT and telecom, banking and insurance, railways and civil aviation today made representation before the GST Council.

A four-tier GST tax structure of 5 per cent, 12 per cent, 18 per cent and 28 per cent that aims to lower tax incidence on most goods and keep out essential items was decided by the GST council in its meeting on November 3.

Luxury items like high-end cars and demerit goods including tobacco, pan masala and aerated drinks, would be taxed at the highest rate and would also attract a cess in a way that the total incidence of tax remains at almost the current level.

From that cess a Rs 55,000 crore fund was proposed to be set up, but ever since the demonetisation announcement on November 8, states have been demanding higher compensation to meet revenue shortfall.

West Bengal Finance Minister Amit Mitra estimated that the compensation amount could go up to Rs 90,000 crore, while Kerala Finance Minister Thomas Isaac said that more items other than sin goods and luxury goods would be brought under the ambit of cess.