Automobile Cess Conundrum: Accumulated Funds Set to Lapse as GST Rates Change
The compensation cess of Rs 2,500 crore on auto companies will lapse as GST rates change, effective September 22. Auto companies urge adjustments or refunds for this cess, which was initially imposed to compensate states for revenue losses. Concerns have been raised as the levy discontinues.
- Country:
- India
An impending change in GST rates is set to render an estimated Rs 2,500 crore of accumulated compensation cess on automobile companies' books obsolete, according to government officials.
Currently, automobiles fall under the highest GST slab of 28%, with an additional compensation cess of 1% to 22%, influenced by vehicle type. From September 22, cars with smaller engines will face an 18% GST, while larger vehicles will incur a 40% rate, eliminating the need for the compensation cess.
Auto companies, struggling with the accumulated cess, have pressed for adjustments or refunds to offset their tax liabilities. CBIC Chairman Sanjay Kumar Agarwal acknowledged the industry's concerns and explained that this non-utilizable cess will remain in their books, marking a significant challenge in the sector.
(With inputs from agencies.)
ALSO READ
GST dept coordinating with industry to upgrade software for smooth, glitch-free rollout of overhauled tax structure: CBIC chief.
Expect some dip in GST collection for initial months, as taxes are paid through accumulated ITC, but festive demand will boost sales: CBIC.
CBIC chief Sanjay Agarwal confident of seamless roll-out of new GST rates from Sep 22, says industry has 2 weeks to adjust back-end systems.
Google News