SUVs, Luxury Cars to Cost More as GST Cess Hiked to 25%

Under the new GST regime, cars attract the top tax rate of 28 percent.

(Photo: The Quint)

SUVs, midsized, large and luxury cars – that had become cheaper after the GST rolled out on 1 July – will now cost more now. The GST Council has approved a proposal to hike cess on such cars to 25 percent, from 15 percent.

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.

Under the new GST regime, cars attract the top tax rate of 28 percent. 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 GST Council considered this issue in its 20th meeting held on 5 August and recommended that the central government may move legislative amendments required for increasing the maximum ceiling of cess leviable on motor vehicles falling under headings 8702 and 8703 to 25 percent instead of the present 15 percent.

The decision on when to raise the actual cess leviable on the same will be taken by the GST Council in due course, the report added. The increase in compensation cess will require an amendment to the Schedule in section 8 of the GST (Compensation to a State) Act, 2017.

The vehicles that fall under headings 8702 and 8703 include mid-segment, large cars, SUVs and motor vehicles which can carry more than 10 persons, but less than 13.

Also, hybrid vehicles with engine capacity of more than 1500 cc and mid segment hybrid cars of less than 1500 cc fall in the category.

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