Cabinet clears abolition of cesses for GST rollout, government to incur Rs 65,000-crore loss


NEW DELHI: The Union Cabinet has approved amendments in the Customs and Excise Act relating to abolition of cesses and surcharges on various goods and services to facilitate implementation of GST.

Following this, the Centre will abolish 16 cesses and surcharges on union excise and service tax as it lays down the path for rolling out Goods and Services Tax (GST) from July.

The amendments in the Customs Act, 1962, allow furnishing of information relating to import or export of goods by specified persons to enable analysis and detection of cases of under or over-valuation in imports and exports.

Cesses to be abolished include Krishi Kalyan and Swachh Bharat. This would lead to a loss of about Rs 65,000 crore by the exchequer. To make up for this dent, the government would have to find resources from the budget.

“Amendments or repeal of various provisions of other Acts which will no longer be relevant consequent on rollout of GST will result in cleansing of the irrelevant portions from the Statute Book and reduce multiplicity of taxes,” an official release said after the Cabinet meeting chaired by Prime Minister Narendra Modi.

The government is hoping that some of the resources would come from higher GST mop-up as more entities would enter the tax net. Given that the Centre and the states are yet to finalise GST rates, it is not clear if consumers eating in restaurants or paying phone bills would be better off or worse after cesses and surcharges are abolished. While the existing cesses, other than those on petroleum products (which are outside GST), would go away , the GST Council has decided to levy cess on tobacco, pan masala, soft drinks and luxury vehicles for five years to meet the annual compensation re quirement. Now, states would also move to abolish cesses and surcharge that they levy.

The Cabinet has approved amendment to the Customs Act, 1962, the Customs Tariff Act, 1975 and the Central Excise Act, 1944.

It also approved repeal of the Central Excise Tariff Act, 1985 and amendment or repeal of the provisions relating to Acts under which cesses are levied.

Earlier this week, the Cabinet had cleared four legislations for implementing GST as the government sprints to meet the July 1 launch schedule of the indirect tax reform, which can add up to 2 per to India’s economic growth.

The Bills on compensating states for any loss of revenue from the GST rollout in the first five years as well as those enabling levy of the new tax on intra- or inter-state movement of goods and services will be introduced in Parliament this week.

The decision to do away with existing cesses came along with cabinet approval for amendments to the Customs Act, the Customs Tariff Act, Central Excise Act and repeal of the Central Excise Tariff Act.

In addition, new clauses are proposed to be incorporated in the Customs Act to provide for furnishing of information on import and export of goods to detect under or over-valuation and misuse of export promotion schemes.

The approval of Parliament, along with that of all state Assemblies, will complete the legislative process for the one-nation-one-tax regime through merger of central taxes such as excise duty and service tax and state levies including VAT.




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