The council will look at levying the cess at the manufacturing stage based on the production capacity against the current practice of imposing it on the supplies made by the manufacturer.
This proposed amendment to the GST (Compensation to States) Act, 2017, would be discussed by the council in its meeting later this month.
According to the amendment, compensation cess will be levied on the presumptive capacity of production declared by a manufacturer to the GST authorities, sources said.
Commodities such as pan masala are prone to tax evasion as they are available in small sachets and are bought mostly in cash and, hence, tracking their final supplies is difficult for the tax authorities.
Once the council, chaired by finance minister Arun Jaitley and comprising his state counterparts, approve the proposal, it would be sent to the law ministry for vetting.
The amendment is likely to be introduced in the second leg of the budget session of Parliament in March.
At present, a 60 per cent cess is levied on pan masala on top of the highest GST rate of 28 per cent. However, pan masala containing gutkha attracts a 204 per cent cess. A cess, on top of the highest tax rate, is levied on luxury, demerit and sin goods. The proceeds from the cess are used to compensate states for any revenue loss on account of implementation of the GST regime from July 1, 2017.
According to sources, a new section is likely to be inserted in the GST (Compensation to States) Act as an “enabling provision” giving power under the law to levy and collect cess on “specified goods” based on the capacity of manufacture or production.
Source: The Telegraph
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