Industry body Assocham has opposed a proposal within the GST Council to levy an additional cess to make a corpus for compensation to States for any revenue loss from GST implementation.

Additional cess should not be made applicable as this would lead to “distortion and cascading of taxes”, Assocham Secretary-General DS.Rawat said in a letter to Finance Minister Arun Jaitley.

Instead of levying cess, the additional revenue required for such compensation can be collected by increasing the tax rates (by 1 or 2 per cent), Assocham has suggested.

The idea of levying cess in order to make a corpus for compensation to States does not seem to be feasible, the chamber letter said.

Also, the government, in its various documents released so far, has always emphasised on the non-applicability of cess in the GST regime. It has been widely advocated across all forums that under GST regime all the existing cess will get subsumed, the chamber pointed out.

Assocham has also suggested that the rate category of 26 per cent (even if it is made applicable) should only provide for select products (demerit products) which were mentioned in 40 percent category of the CEA report.

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