Cabinet approves raising GST cess on luxury cars to 25%

With the Cabinet nod on Wednesday to an Ordinance regarding the hike in Goods and Services Tax (GST) cess on mid-size, large cars and SUVs from current 15% to proposed 25%, the prices of all cars in these segments will go up.

The proposal before the Cabinet was to increase the GST cess rate on these cars to 25%. After the green light from the Cabinet, the government will further push for a Presidential seal to the Ordinance for hiking the maximum cap of GST cess on cars. After receiving the President’s node, the Central Board of Excise and Customs will issue the cess hike notification.

Also, the government will put forward a formal notification to the GST Council in the scheduled meeting of GST council on 9 September.

“The proposal of charging  higher GST cess on SUVs has been cleared by the Cabinet,” sources in CBEC said.

The prices of most SUVs were cut between Rs 1.1 lakh and Rs 3 lakh following the implementation of GST, which subsumed over a dozen central and state levies like excise duty, service tax, and VAT from 1 July. Cars attract the top tax rate of 28%. On top of this, a cess of 1-15% is levied for the creation of the state compensation institutions.

To rectify the anomaly, the GST Council, headed by Union Finance Minister Arun Jaitley and comprising representatives of all states, had on 5 August recommended that the Central government move legislative amendments required for increasing the maximum ceiling of cess leviable on motor vehicles to 25% from present 15%.