The Central Board of Indirect Taxes and Customs (CBIC) has issued a fresh set of clarifications, stating that a compensation cess of 22% under goods and services tax would be applicable on sports utility vehicles that specify four conditions.
The conditions are that these vehicles are popularly known as SUVs, the engine capacity exceeds 1,500 cc, the vehicle ilength exceeds 4,000 mm, and the ground clearance is 170 mm and above.
“This clarification is confined to and is applicable only to Sports Utility Vehicles,” the CBIC said.
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The clarification to field offices comes following a decision to this effect taken at the GST Council meeting in December 2022.
A clutch of demerit items including panmasala and tobacco products and some luxury goods like high-end vehicles attract compensation cesses in addition to the highest GST rate of 28%.
In another circular, the CBIC has said that incentives paid to banks for promotion of RuPAy debit cards and low value BHIM-UPI transactions should not attract GST.
Abhishek Jain, Partner Indirect Tax, KPMG in India said the new clarifications provide major clarity on the issue. “This issue seems to have been put to rest with the four conditions being explicitly spelled out for levy of 22% GST compensation cess levy,” he said.
Earlier, there was an element of disparity among states in charging the cess on vehicles with lack of clarity on definition of SUVs.
Though the five-year GST compensation period for states ended on June 30, 2022, the cesses will continue to be levied from July 1, 2022 to March 31, 2026, to service the loans taken by the Centre to meet the shortfall in the compensation kitty in FY21 and FY22.
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The CBIC has also clarified around levy of 18% GST rate on Rab, which has been distinguished from molasses, Jain said.
The Supreme Court in its order in Krishi Utpadan Mandi Samiti versus Shankar Industries and others has distinguished Rab from molasses, CBIC said, adding that Rab being distinguishable from molasses is not classifiable under heading 1703.
“Accordingly, it is hereby clarified that Rab is appropriately classifiable under heading 1702 attracting GST rate of 18%,” it said.
The CBIC also clarified on snack pellets such as ‘fryums’, which are manufactured through the process of extrusion and said that they attract GST at the rate of 18%.
The Board said: “…incentives paid by MeitY to acquiring banks under the Incentive scheme for promotion of RuPay Debit Cards and low value BHIM-UPI transactions are in the nature of subsidy and thus not taxable.”
Under the Incentive scheme for promotion of RuPay Debit Cards and low value BHIM-UPI transactions, the Government pays the acquiring banks an incentive as a percentage of value of RuPay Debit card transactions and low value BHIM-UPI transactions up to Rs 2,000.