SUVs, luxury cars to cost more as GST Council okays proposal to hike cess to 25%, business-news, Hindustan Times
SUVs, luxury cars to cost more as GST Council okays proposal to hike cess to 25%
Updated: Aug 07, two thousand seventeen 22:36 IST
By PTI , Fresh Delhi
SUVs, mid-sized, large and luxury cars that had become cheaper after GST rollout on July one will cost more as the GST Council has approved a proposal to hike cess on them to twenty five per cent, from fifteen per cent now.
Under the fresh GST regime, cars attract the top tax rate of twenty eight per cent. On top of this, a cess of 1-15 per cent is levied on them to create a corpus to compensate states for loss of revenue from GST implementation.
The finance ministry, in a statement, said that after introduction of GST, the total tax on motor vehicles (GST plus compensation cess) has come down vis-a-vis the total incidence in pre-GST regime.
«The GST Council considered this issue in its 20th meeting held on August five and recommended that the central government may stir legislative amendments required for enhancing the maximum ceiling of cess leviable on motor vehicles falling under headings eight thousand seven hundred two and eight thousand seven hundred three to twenty five per cent instead of the present fifteen per cent,» the statement read.
The decision on when to raise the actual cess leviable on the same will be taken by the GST Council in due course, it added.
The increase in compensation cess will require amendment to the Schedule to section eight of the GST (Compensation to a State) Act, 2017.
The vehicles that fall under headings eight thousand seven hundred two and eight thousand seven hundred three include mid-segment, large cars, SUVs and motor vehicles which can carry more than ten persons, but less than 13.
Also, hybrid vehicles with engine capacity of more than one thousand five hundred cc and mid segment hybrid cars of less than one thousand five hundred cc fall in the category.
The Goods and Services Tax (GST) Fitment Committee — which is responsible for calculating the tax rates on various goods and services — at its meeting on July twenty five felt that the total tax incidence in GST seems to have come down vis-a-vis pre-GST total tax figure.
The highest pre-GST tax incidence on motor vehicles worked out to about 52-54.72 per cent, to which Two.Five per cent was added on account of CST, octroi etc. Against this, post- GST, the total tax incidence came to forty three per cent.
After twenty eight per cent GST, to maintain the pre-GST tax incidence, the highest compensation cess rate required will have to be twenty five per cent, the fitment committee felt. Against this, the ceiling rate of compensation cess on motor vehicles is fifteen per cent.
Prices of most SUVs were cut inbetween Rs 1.1 lakh and Rs three lakh following implementation of GST, which subsumed over a dozen central and state levies like excise duty, service tax and VAT, from July 1.
While all cars attract a peak GST rate of twenty eight per cent, large motor vehicles, SUVs, mid-segment, large, hybrid cars and hybrid motor vehicles attract a cess of fifteen per cent on top of it. Puny petrol cars of less than four metres and one thousand two hundred cc are marked for a cess of one per cent while petite diesel cars of less than four meters and one thousand five hundred cc engine are levied a cess of three per cent.
The cess collected on cars as also tobacco and coal will be used to compensate the revenue loss of states by implementing GST. For this, a separate statute has been passed by Parliament. This prescribes the maximum cess rate.
And now, to switch that cess rate, an amendment to this law will be needed.