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GST on luxury cars and SUVs to increase

GST on luxury cars and SUVs to increaseā€¯

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 etc. The additional one percent tax that was levied by the government on cars that cost more than Rs 10 lakh earlier in the year also drove prices up for buyers while later in the year, demonitisation saw a sharp decline in November and December sales figures.

President Ram Nath Kovind has promulgated an ordinance enabling an increase in the goods and services tax (GST) cess on motor vehicles, including medium-sized cars, large cars and sports utility vehicles (SUVs), from 15% to 25%.

The Union cabinet chaired by Prime Minister Narendra Modi had on 30 August approved the proposal for an Ordinance. With this amendment, taxation on luxury, SUV and other vehicles would be brought at par with that prevailing pre-GST rollout. The GST Council has chose to increase the cess on luxury cars and SUVs from 15per cent to 25 per cent. The GST council which was mulling over raising cess finally took the decision to increase it to 25 per cent.Since the implementation of GST, all the indirect taxes have been replaced by GST.

The issue regarding the increase in effective rate of Compensation Cess on motor vehicles will be examined by the GST Council in due course. This cess has been hiked to up to 25 per cent now.

The ordinance notified on Sunday in the official gazette said the change is applicable on all motor vehicles with a capacity of up to 13 persons as well as on all cars where the cess is 15 per cent at present.

Against this, post-GST the total tax incidence came to 43 per cent. On top of this, a cess of 1 to 15 per cent is levied for the creation of the state compensation corpus.

The cess collected from cars, coal and tobacco will be used to compensate the revenue loss of states by implementing GST.



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