States Object for Imposing Cess on Ultra Luxary and Demerit goods under Proposed GST

The Proposal from the Centre that triggered Objection from states was the Imposition of Cess on Ultra luxury and demerit goods such as Big cars, aerated beverages, and tobacco products.  The basic purpose of Imposing cess on Luxury and demerit goods is to treat it as means to finance the compensation that Centre have to pay to the states. A number of states Objected to the use of GST collections (cess on GST) to finance compensations. States asked to the centre to use Consolidated fund of India for compensating states losses due to shifting to new tax regime.

Centre will finalise the tax structure at the next meeting to be held on 3rd and 4th November and can frozen the tax rate only after deciding whether compensation to states is to be funded out of the rate structure itself or from some special cess or some third source.

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