Maharashtra, Tamil Nadu raise taxes outside GST, Centre says they can

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Maharashtra raises vehicle registration fee, TN with entertainment tax

Two state governments, Maharashtra and Tamil Nadu, have started imposing taxes outside the national goods and services tax (GST), something the Centre says they can do.The Centre says states may impose mandi (wholesale markets) tax and vehicle registration fee, besides raising entertainment tax beyond the GST rate.

On Tuesday, the Maharashtra cabinet decided to raise the one-time registration fee on private two-wheel and four-wheel vehicles by two percentage points, for new ones registered in the state. This is to compensate for a combined revenue loss of Rs 600-700 crore annually that it will lose on local body taxes and octroi after GST implementation. The increase is across vehicle categories. It has, however, capped the tax for imported cars at Rs 20 lakh, as against the earlier charge of 20 per cent of the total car cost.

A report by news agency PTI stated the tax on two-wheelers and three-wheelers had been raised from the existing 8-10 per cent to 10-12 per cent; for petrol-driven cars, from 9-11 per cent to 11-13 per cent; for diesel-run cars, from 11-13 per cent to 13-15 per cent; for CNG/LPG cars, from 5-7 per cent to 7-9 per cent.

Tamil Nadu has announced it will levy a 30 per cent state entertainment tax over and above the GST rate of 28 per cent on theatres. The double taxation will make tickets in Tamil Nadu more expensive than in neighbouring states. Theatre owners said they could not do business if they have to pay 58 per cent tax on a Rs 100 ticket and would have to close. For years, movie tickets in Tamil Nadu have had a cap of Rs 120.

Meanwhile, in Delhi, Union revenue secretary Hasmukh Adhia said states were well within their rights to increase vehicle registration fees, entertainment tax and stamp duty. What was barred was any entry tax on goods movement. “How proper or improper it is (states increasing fees and taxes) is not for the Centre to judge,” said Adhia.

Octroi, he said, now subsumed in GST, was big income for Maharashtra. On the Tamil Nadu move: “The Constitution gives powers to state governments to impose additional tax in certain categories.”

After objections from some state governments, the GST Council had earlier decided on two rates for cinema tickets. Those costing up to Rs 100 now draw 18 per cent GST; those over Rs 100 attract 28 per cent. Since local body taxes will be subsumed under GST, states will be free to impose an additional tax over 28 per cent on entertainment to fund state local bodies, the Council had decided. Cinema is the only category where such a carving has been created by way of law.

Source : http://www.business-standard.com/article/economy-policy/maharashtra-tamil-nadu-raise-taxes-outside-gst-centre-says-they-can-117070401228_1.html

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