Finance Minister Arun Jaitley proposes to increase taxes on luxury cars and introduce a new cess on all services to fund his ambitious plans for the agriculture sector and farmer welfare.
He also doubled the Clean Environment Cess on coal, lignite and peat to 400 rupees/tonne to boost agriculture spending, a move that will increase power tarrif in a country mainly reliant on coal for its energy needs. Nearly 60 percent of India’s power generation capacity is coal based.
The new Krishi Kalyan Cess will be levied at 0.5 percent on all taxable services and the proceeds will be used exclusively to finance the government’s various initiatives for farmers, he said. The cess will come into effect from June 1.
A new one percent tax on cars costing more than a million rupees in value and purchase of goods and services exceeding 200,000 rupees will also be introduced.
Jaitley also proposed an infrastructure cess of 1 percent on small petrol, LPG, CNG cars, 2.5 percent on diesel cars of certain capacity and 4 percent on other higher engine capacity vehicles and SUVs, making all passenger vehicles expensive.