The increased GST cess on mid- sized, luxury and SUV cars will come into effect on September 11. Earlier, the Government had approved an ordinance that empowered the GST Council, consisting of Union and state finance ministers, to increase the cess on automobiles from 15% to 25%. The government had said that the 10% approval is an “enabling provision”.
The GST Council on September 9th decided to hike cess on mid-sized cars by 2 percent, taking the effective GST rate to 45 percent.
Also, cess on large cars has been hiked by 5 per cent, taking the total GST incidence to 48 percent while that of SUVs by 7 percent to 50 percent.
The Central Board of Excise and Customs on Sunday tweeted that “Notification regarding the increase in the effective rates of the Compensation Cess on specified motor vehicles will be issued on September 11, 2017, effective from 00 hours the same day,”
After the GST Council meet on September 9, 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 per cent, it has been hiked by up to 7 per cent,” Jaitley had said.
Cess on small petrol and diesel cars, hybrid cars and those carrying up to 13 passengers has not been hiked.
Post rollout of GST, Car prices had dropped by up to Rs 3 lakh which were lower than the combined central and state taxes in pre-GST days. The Council raised the cess in order to fix this anomaly
Under the GST regime, cars attract the highest tax slab of 28 percent and on top of that, a cess is levied. An ordinance was promulgated last week to hike the cess from 15 percent to up to 25 per cent.
The Council has also 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 percent, to which 2.5 percent was added on account of central sales Tax, octroi and the like. Against this, post-GST, the total tax incidence came to 43 per cent. With the revision in cess quantum, now the anomalies have been removed to a greater extent.
