GST: Cars placed under highest 28% slab

The Goods and Services Tax (GST) council has decided to implement a four-tier tax structure of 5, 12, 18, and 28 percent. The lower rates have been assigned to essential commodities, while the highest slab has been dedicated to luxury and de-merit goods. All passenger vehicles have been placed under the 28% tax rate, while luxury cars will also attract an additional cess. The council hasn't yet mentioned the definition of luxury cars, nor has the rate of additional cess been revealed.

Under the current tax structure, small cars attract multiple taxes including excise duty, VAT, CST, etc., which cumulatively amount to around 30%. Hence, the overall prices of small cars post GST are expected to remain nearly the same. However, the fate of luxury vehicles will only be known once the council reveals further details about the classification of vehicles and the additional cess applicable.

The Society of Indian Automotive Manufacturers (SIAM) had earlier recommended that all small cars and MUVs be placed under a standard tax rate, while luxury cars should be placed 8% above this standard rate. The organization had also suggested some incentives for electric, hybrid and other alternative fuel vehicles. No details about the presence of any such incentive under GST have surfaced yet.

Further details are expected to be revealed after the council's second deliberation meeting today. The Government has already announced that the new GST tax structure will be made applicable from April 1, 2017.