GST Council hikes Luxury car cess by 10 percent

The GST Council has decided to hike the cess on high-end luxury cars by 10 percent from the current 15 percent. The decision was taken during a meeting on August 5, 2017, however a price hike is not expected until September 9, 2017. At the moment, the GST Council has only recommended the changes in tax structure which would come into effect once an amendment to the GST compensation law is passed.

Since the 1st of July 2017, under GST, luxury cars attracted 15 percent cess with an effective tax rate of 40 percent. With the luxury car cess hiked to 25 percent, these vehicles now attract a maximum levy of 53 percent. It has been estimated that price of luxury cars could go up by Rs. 72,000 to Rs. 2.58 lakh.

A statement from the finance ministry said that following GST implementation, maximum tax incidence on luxury cars which was at 45 percent came down to 43 percent. This resulted in a price cut between Rs. 1.1 lakh to Rs. 3.5 lakh on some premium vehicles.

According to media reports, the decision to readjust the cess has been taken so that the drop in price of luxury cars doesn't send out a wrong message that the recent tax reforms favour the rich.

Source: Economic Times