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Cess on luxe goods to be a spoiler, defeats motive of GST: Pros

The second day of the Goods and Services Tax (GST) Council meet that concluded today turned out to be a non-event. Key decisions on the rate structure, cess, and dual-control on services will now be taken up again in next meet scheduled in the first week of November.

Sharing their views on the likely implementation of a cess on luxury goods to compensate the states for revenue loss, experts on the subject said cess defeats the purpose of the GST to subsume any other taxes and will prove to be a disappointment.

According to Pratik Jain of PricewaterhouseCoopers says it will lead to cascading of taxes and a higher rate in place of a cess would be better. “This is like taking one step forward and two steps backward,” he says.

Mohandas Pai, Chairman of Manipal Global feels the government should rather create a separate kitty over and above the budgeted amount rather than implementing a cess.

“Multiplicity of rate is going to create a problem not only in administration but it may also lead to litigations as there will be classification issues,” says Nihal Kothari Executive Director, Khaitan & Co.

Hari Shankar of Ernst & Young and Sachin Menon of KPMG also shared their views.

Transcript to follow…