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GST: Transport buses to attract 15% cess, prices to rise

LiveMint logoLiveMint 29-06-2017 PTI

New Delhi: The government has decided to levy a cess of 15% over and above the GST rate of 28% on buses, thus putting public transport vehicles in the same tax bracket as luxury cars and hybrid vehicles. The cess is likely to increase prices of buses and may hamper public transport, automobile makers said.

As per the latest finance ministry notification, motor vehicles for the transport of 10 or more persons, including the driver, will attract a services tax compensation cess of 15%. The 15% cess is over and above peak rate of 28%, thereby taking the overall tax incidence on such vehicles to 43%. Such buses currently attract a total tax of 27.8%.

When contacted, the Society of Indian Automobile Manufacturers (SIAM) said the move would hamper public transport.

“Government has been speaking about expanding public transport in the country to reduce air pollution. So by increasing tax on buses it is going against its own stated position,” SIAM Director General Vishnu Mathur told PTI.

The need of the hour is public transport and higher tax would lead to rise in bus prices thus impacting demand, he added.

A spokesperson of leading commercial vehicle maker Ashok Leyland said: “A clarity has been sought on the subject which is brand agonistic.. If this is true, the increase in the cost will impact all operators and the end users at large.”

Earlier, the automakers had asked the government to lower tax on hybrid cars. The government, however, did not accept the demand.

The GST council has fixed 43% tax (28% GST plus 15% cess) on hybrid cars, a rate that industry felt was too high for the fuel efficient vehicles. The automakers in their demand to the GST Council had asked it to reduce the tax rate on hybrid vehicles to 18%, arguing that they are much more efficient and eco- friendly but require scale and volume to become economically viable.

As per the proposed rates under the GST regime, hybrid vehicles have been put in the same category as big petrol and diesel luxury cars attracting 28% rate with a cess of 15%.

The tax incidence on hybrid vehicles will go up to 43% from the current effective tax rate of 30.3%. At present, hybrid vehicles attract excise duty of 12.5%, similar to entry-level small cars such as Tata Nano or Maruti Alto.

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