The only way to bring down the Goods and Services tax is to find as many alterations as possible and this is exactly what the states are doing.
The government of the two states, Maharashtra and Tamil Nadu has started imposing taxes on new vehicle purchases and movie tickets above the fixed GST rate, and the Centre believes this something they can do.
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.
Similarly, Tamil Nadu has imposed an additional 30 percent tax on movie tickets in addition to the 28 percent (for tickets priced above Rs 100) and 18 percent (for tickets less than Rs 100) GST rates. That would make the majority tax incidence for the industry close to 60 percent.
In the pre-GST regime, the pan India tax rate on movie tickets was 19.5 percent. Hence the clamor in Tamil Nadu led by the likes of Kamal Hassan is least surprising.
Now, with individual states adding additional tax on the agreed rates, the GST is facing threat on two counts — the idea of having a single rate across the country for a specific product/service category and having a single, transparent rate without state-specific interventions. In other words, letting states have their own say upon agreed rates, the Centre is giving a silent burial to the idea of a ‘one nation, one tax’ dream.