July 6th, 2017
The governments of Maharashtra and Tamil Nadu have imposed taxes outside the Goods and Services Tax (GST). Maharashtra has raised the vehicle registration fee and Tamil Nadu with entertainment tax. This has been allowed by the central government.
The centre has said that the two states, apart from raising tax on entertainment industry beyond the GST rate, it may also impose tax on mandi wholesale markets and vehicle registration fee.
For new vehicles registered in the state, the Maharashtra cabinet on 4 July has decided to raise the one-time registration fee by 2% on private two-wheel and four-wheel vehicles. This is to compensate for a combined revenue loss of Rs 600-700 crore yearly that it will lose on local body taxes after GST implementation.
This increment is for all vehicle categories; it has capped the tax for imported cars worth Rs 20 lakh as against the earlier charge of 20% of the total car cost.
As reported by PTI, the tax on both two-wheelers and three-wheelers had been raised from existing 8-10% to 10-12%. For the petrol-driven cars, the raised tax would be from 9-11% to 11-13%, from 11-13% to 13-15% for diesel-run cars, and for CNG/LPG cars it would be from 5-7% to 7-9%.
The state of Tamil Nadu has also announced intentions to impose 30% of the state entertainment tax over and above the GST rate of 28% on theatres. The tickets will get more expensive by the double taxation in Tamil Nadu than neighbouring states.
As per reports, theatre owners have said that their business would land in a loss and have to close if they have to pay 58% on a Rs 100 ticket. Movie tickets in Tamil Nadu state were limited to Rs 120 for years.
Tamil Nadu theatre owners and distributors are already on indefinite strike demanding withdrawal of 30% local body tax on movie tickets.
Centre approves the additional taxes
In the meantime, Union Revenue Secretary Hasmukh Adhia has said that the two states were well within their rights to increase the tax on the entertainment industry and registration fees and stamp duty.
As quoted by Business Standard, Adhia said, “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.” He further added, “Octroi, now subsumed in GST, was a big income for Maharashtra”.
Adhia, while giving his opinion on Tamil Nadu state move said, “The Constitution gives powers to state governments to impose an additional tax in certain categories.”
The GST Council had earlier decided on two rates for cinema tickets after getting objected from some state governments. The tickets which were costing up to Rs 100 now draw 18% GST and those over Rs 100 have 28%.
The council had decided that the states will be free to levy an additional tax of over 28% on entertainment to fund local state bodies, as local body taxes will be now absorbed under GST.
Cinema is the only category where such a carving has been created by way of law.