Cess Increase on Luxury Cars

The Goods and Services Tax (GST) Council on August 5, 2017, had approved a proposal to change GST Compensation Law to raise the cap on the cess that can be levied on motor vehicles. The cabinet favored the ordinance that will allow the cess levied on luxury cars, Sports Utility Vehicle (SUV’s) and big cars under the goods and services tax (GST) regime to be raised to as much as 25% from 15% making them uneconomical.

As per finance minister Mr. Arun Jaitely, the main intention behind this is eliminating any rarity that led to prices of such vehicles dropping after the implementation of GST, while those of smaller autos didn’t change.

Parenthetically to the GST regime, the effective tax rate for small petrol cars (less than 4m) is 29%, small diesel cars (less than 4m) is 31%, mid-length cars (more than 4m and engine less than 1500cc) is 53%, big cars (more than 4m and engine more than 1500cc) is 53%, SUV’s is 53% and hybrid vehicles is 53%.

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