Another Mess over GST Compensation Cess

Government has officially released the draft GST Compensation law on 26.11.2016. As per the provisions of section 8 of the Draft law it has been proposed that every taxpayer shall pay a cess at the rate decided on the value of each supply made by him/her. Such Cess shall be utilized for compensating the loss to the states due to enforcement of GST. Also as per provisions of section 16 of the CGST Act such cesses shall not be allowed as input tax credit against the supply made by the supplier. This shall have inflationary effect and prove to be an additional burden on the final consumer.

It has been proposed that GST shall subsume all the indirect taxes except a few. GST Council has also decided that there shall be four rate structures under GST. Although the tax revenue of the government will increase post GST there shall be gradual reduction in the prices. Further it has been made mandatory for the taxpayers to pass on the profit derived due to cost saving under GST to the consumers. In such a scenario levying GST Compensation Tax is not justifiable at all. On the one hand a genuine taxpayer is facing the brunt of demonetization and on the other hand even to compensate the government for the new law, he has to pay from his own pocket. Why should a taxpayer pay all the time when ever government needs the funds? Earlier it was Krishi kalyan Cess, then came swachh bharat cess now GST Compensation Cess. What is the use of paying proper taxes in time when every time funds are required, new cess is levied upon the taxpayers?

It is totally unjustified and the government should do away this compensation cess. Also the opposition should press for law which should restrict the powers of the parliament to levy cess on the taxpayers each and every-time the government wants it.

by:

Keshav R Garg

(B.Com, FCA, CS, ISA (ICAI))

Faculty for GST: Indirect Tax Committee of ICAI

Author: Bharat's GST Ready Reckoner

A Handbook on GST

Adviser for GST: Industries Association of Chandigarh

Member: Indirect Tax Committee of CII, PHDCCI, MyGst.MyTax Foundation

Address: 3328, Sector 27 D, Chandigarh, India - 160 019

Phones: +91-172-461-3328, +91-98880-90008

Mails: mygst.mytax@gmail.com, keshavgarg@kdai.in

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