In its latest review meeting held on Sunday, Goods and Service Tax (GST) council has decided to increase the cess on luxury cars and SUVs. The council headed by Finance Minister Arun Jaitley has decided to raise the cess on luxury automobiles to 25 percent as compared to existing 10 percent. However, the prices of these vehicles might not go up immediately as any increase in cess require an amendment to the GST compensation law. “The council approved an amendment to the GST law to enable an increase in the rate of levy of compensation cess,” said a government official aware of the happenings. The official also revealed that there was a mutual consent among the members of GST Council to have cess on high-end/luxury cars and SUVs to be on the higher side so that it can be increased if the need arises. Currently, under GST cars and SUVs have been placed under the highest tax bracket of 28% and the maximum tax that could be levied is maximum of 40% (excluding cess). Sub-4-meter petrol cars with engine capacity of upto 1200 cc attract a 1% cess, small diesel cars having 1.5L engine or less attract 3% cess in addition to the 28% GST.
GST rate on large cars and SUVs is levied at 43% (including cess) which set to increase by 10% to 53% post being amendment as a law by the Council. The cess on mid-size and large cars currently stands at 15%. Almost every carmaker had revised prices of its products after the rollout of GST on July 1 2017. The price benefits post GST was immediately passed on to buyers but many small cars also saw hike in prices due to additional cess. The central government had introduced a separate bill that compensates the states for loss of revenue for imposition of cess on luxury goods that compensates the states for any loss of revenue. Government also believes that proper input tax credit system would result in overall price reduction.
