GST cess on sedans, SUVs hiked to 25 percent

Union cabinet has approved a hike in GST cess on mid-size sedans, SUVs and luxury cars. GST cess on the aforementioned vehicles will be increased from the current 15% to 25%. 

The GST Council met on August 5, 2017 to review tax rates that were rolled out on July 1, 2017 as part of the new GST regime. The council had approved a hike in cess to 25% on large sedans and SUVs. Now that the government of India has given its nod for the hike, the process for the required amendment to the GST Act, 2017 can begin. The GST Council is said to announce the date when the revised cess will be applicable once the law is amended. 

The decision comes in the wake of the GST Council's recommendations for a hike in cess after prices of most vehicles saw a steep drop following the implementation of GST. Certain vehicles saw a price cut of around Rs. 1-3 lakh. It's worth noting that the highest pre-GST tax incidence on cars was around 52-54.7% excluding other taxes like central sales tax, octroi, etc. In comparison, this dropped to 43% post-GST (28% GST + 15% cess). With the current increase in cess to 25%, the highest tax incidence is now closer to the pre-GST percentage.

Under current provisions of GST, large SUVs, luxury cars and hybrid vehicles attract a cess of 15%, while sub-4 meter, 1200cc cars and sub-4 meter, 1500cc diesel cars attract a cess of 1% and 3% respectively in addition to the 28% GST. 

Source: ET Auto