The back and forth on the GST bills with the luxury car continues as the Lok Sabha passed a bill to increase the Cess on Luxury Vehicles from 15 percent to 25 percent. That’s not all the cess will be applicable alongside the existing 28 percent GST that is already applicable on cars that are above 4 metres in length. Bringing the total tally to 53% bringing it back to the region of pre-GST tax rates for the luxury cars. Which mean over the last year we took one step forward and two steps back in the process of simplifying the tax slabs on motor vehicles. In a statement to the press finance minister Arun Jaitley said that this Cess increase on Luxury cars is to compensate states for the loss of revenue that came about from the implementation of the GST earlier this year. Earlier this year some states had said that they might consider raising taxes to substitute for the loss in revenue. Which means that the bill will now replace the ordinance, which was issued in September by the GST council that increased the GST on cars that breach the 4-meter mark.
The original ordinance was issued by the council with multiple subsections which resulted in increasing the Cess from 15 percent to 17 percent for cars, and to 22 percent for SUVs. With this announcement, the total Cess will now touch a rather astronomical 25 percent. When the GST council announced earlier that they would be moving the Lok Sabha to pass the bill, the move was condemned by car makers across the country as an afterthought move, that needn't have been made, to begin with. This also shows the government may not have entirely thought through the implications of the GST before passing the bill. The result is apparent in the form of several amendments that were brought to the forefront after the GST was passed. What this means for the layman is that aside from the operational cost driven increase in prices car makers will also be forced to revert to pre-GST prices if not higher. Now there is also a matter of the sub-bifurcation of the bill that was considered earlier in line with body shape, although no clear statement on the matter has emerged from government offices.
Now when the GST had original surface it was almost unanimously lauded by all auto manufacturers who said that it would ease the process costs and make tabulation more transparent. However, with the government playing Yo-yo with policy the whole GST implementation in the industry has taken on a sour note, and this might affect expansion plans and product strategies from across the spectrum in the auto industry.