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GST cess hike in cars to take effect from Monday

LiveMint logoLiveMint 10-09-2017 PTI

New Delhi: The increased goods and services tax (GST) cess on mid- sized, luxury and SUV cars will come into effect from Monday.

The GST Council on 9 September decided to hike cess on mid-sized cars by 2%, taking the effective GST rate to 45%. Also, cess on large cars has been hiked by 5%, taking the total GST incidence to 48% while that of SUVs by 7% to 50%.

“Notification regarding the increase in the effective rates of the compensation cess on specified motor vehicles will be issued on 11 September 2017, effective from 00 hours the same day,” the Central Board of Excise and Customs (CBEC) tweeted.

After the GST Council meet Saturday, 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%, it has been hiked by up to 7%,” 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 Rs3 lakh as the tax rates fixed under the GST, which came into effect from 1 July, 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% and on top of that, a cess is levied. An ordinance was promulgated last week to hike the cess from 15% to up to 25%.

The Council Saturday 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%, to which 2.5% was added on account of central sales Tax, octroi and the like. Against this, post-GST, the total tax incidence came to 43%. With the revision in cess quantum, now the anomalies have been removed to a greater extent.

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