The Goods and Services Tax (GST) regime that came into effect from July 1 was a mammoth reform aimed at bringing about a system of ‘one nation, one tax’. However, states including Maharashtra and Tamil Nadu, are imposing multiple taxes to meet the shortfall on taxes that have been subsumed into GST. Now, the fear is that other states may also follow suit.

GST has subsumed multiple taxes including central excise, value-added tax, service tax, octroi, sales tax and entry tax among others. However, in the case of entertainment tax, states were given powers to impose additional tax over and above GST.

Tamil Nadu has decided to levy 30 percent state entertainment tax over and above the 28 percent entertainment tax under GST. Theatre owners had maintained a shutdown on Monday protesting the new rates, since they would make movie tickets much expensive than other states.

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Similarly, Maharashtra has hiked motor vehicle registration tax by 2 percent which will take the tax to about 13-15 percent for petrol and diesel vehicles. For two wheelers, it will go up to 10-12 percent depending on the type of vehicle and its price.

Pratik Jain, Partner and Leader Indirect Tax, PwC India "Since state local bodies have been given the powers to impose additional entertainment tax over and above GST, some of them have gone ahead and imposed them. States which did not have this tax earlier should be persuaded to not impose this.”

Jain added that there is a fear that seeing Tamil Nadu and Maharashtra, others may also follow suit and that this amounts to double taxation.

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There were a few states that earlier used to levy additional entertainment tax excluding films from their own region. To bring about a parity in the tax rate, a uniform tax of 28 percent tax on entertainment was decided by the GST Council. But, local bodies were given a right to levy any additional tax in the area of entertainment.

M S Mani, senior director, Deloitte Haskins and Sells explained that this is not a welcome development. “After Mumbai abolished octroi which was 4.5 percent, registration tax for vehicles has been hiked by 2 percent. This effectively means that we are trying to get similar taxes through a backdoor. We are hoping that all states do not follow this practice,” he added.