The increased GST cess on mid- sized, luxury and SUV cars will come into effect from tomorrow. The GST Council on September 9 decided to hike cess on mid-sized cars by 2 per cent, taking the effective GST rate to 45 per cent. Also, cess on large cars has been hiked by 5 per cent, taking the total GST incidence to 48 per cent while that of SUVs by 7 per cent to 50 per cent. “Notification regarding increase in the effective rates of the Compensation Cess on specified motor vehicles will be issued on September 11, 2017, effective from 00 hours the same day,” the Central Board of Excise and Customs (CBEC) tweeted.
After the GST council meet yesterday, Finance Minister Arun Jaitley had said that in large vehicles where affordability of consumers is high, the cess has been increased. “The pre-GST rate has not been restored… Even though we had a headspace of hiking cess by 10 per cent, it has been hiked by up to 7 per cent,” Jaitley had said. Cess on small petrol and diesel cars, hybrid cars and those carrying up to 13 passengers has not been hiked. Car prices had dropped by up to Rs 3 lakh as the tax rates fixed under the Goods and Services Tax (GST), which came into effect from July 1, were lower than the combined central and state taxes in pre-GST days. To fix this anomaly, the Council raised the cess.
Under the GST regime, cars attract the highest tax slab of 28 per cent and on top of that, a cess is levied. An ordinance was promulgated last week to hike the cess from 15 per cent to up to 25 per cent. The Council yesterday decided on the quantum of hike in cess in various segments. The highest pre-GST tax incidence on motor vehicles worked out to about 52-54.72 per cent, to which 2.5 per cent was added on account of central sales Tax, octroi and the like. Against this, post-GST, the total tax incidence came to 43 per cent. With the revision in cess quantum, now the anomalies have been removed to a greater extent.