The Union Cabinet on Wednesday approved promulgation of an Ordinance that would allow the GST Council to hike the maximum rate of compensation cess on large and luxury vehicles to 25 per cent from the current cap of 15 per cent.

Briefing mediapersons after the Cabinet meeting, Finance Minister Arun Jaitley said this was only an “enabling Ordinance” and the decision to increase the cess would be left to the GST Council.

"There are 12 different categories of automobiles, of which two are affected by today's decision," he said.

In an earlier meeting on August 5, the GST Council had approved raising cess on SUVs, mid-sized, large and luxury cars, which had become cheaper following implementation of GST from July 1.

The Council, chaired by Jaitley, will now meet on September 9 to take a call on the exact increase in the rate of the cess.

Raising the cess will require an amendment to the Schedule of Section 8 of the GST (Compensation to a State) Act, 2017.

This compensation cess, applicable not just to cars but also tobacco and coal, will be used to form a corpus for compensating the states which experience tax revenue loss post-GST.

The government also cleared the first batch of 65 recommendations of the Lt Gen Shekatkar committee. This will lead to an increased teeth-to-tail ratio for the army. This will lead to a redeployment of 57,000 officers for various other functions.

The Cabinet also decided to increase the upper income limit for creamy layer among the Other Backward Classes (OBCs) to Rs 8 lakh from Rs 6 lakh per annum. “The increase in the income limit is done keeping in mind the increase in the Consumer Price Index,” Jaitley said.

The Cabinet also approved recommendations from a Group of Ministers for creating norms for establishing equivalence of posts in Government and posts in public sector undertakings, and public sector banks for claiming benefit of OBC reservations.

While children of Group A and Group B officers in the government are barred from getting OBC reservation in jobs and in getting admission in educational institutions, the same wasn’t applicable to those serving in PSUs and PSBs, the minister. This decision corrects that anomaly, which has been pending since 1993, the minister said.

The cabinet also gave its nod to an MoU signed between India and Brazil last year to work jointly on Zebu cattle genomics and assisted reproductive technologies.

The green signal was also given to the India-Israel Industrial R&D and Technological Innovation Fund (I4F), which was agreed upon during Prime Minister Narendra Modi’s visit to Israel in July.

India and Israel have agreed to contribute $4 million each for the next five years to the I4F.

The Election Commission of India’s proposal to enter into cooperation with its counterparts in countries such as Albania, Afghanistan, Bhutan, Ecuador, Guinea and Myanmar on matters relating to electoral management administration too was approved by the Cabinet.

Approval was also given to India helping Myanmar in conserving pagodas damaged in the earthquake in Bagan. An MoU for this would be signed during Modi’s visit to the neighbouring country in the first week of September.

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