Lok Sabha passes bill to hike GST cess on luxury cars to 25%

The Lok Sabha has passed a bill to hike GST cess on luxury cars from 15% to 25%. The GST (Compensation to States) Amendment Bill, 2017 seeks to replace the ordinance issued in September 2017 following recommendations by the GST Council. The move will boost funds and compensate states for the revenue loss following GST rollout.

A hike in cess was recommended to the government following a steep drop in the prices of premium cars as GST came into force from July 1, 2017. This resulted in a substantial revenue loss to states as the total tax dropped from 52-54.7% to 43% (28% GST + 15% cess) post-GST. With the cess on mid-size cars, hybrids and luxury vehicles increased to 25%, the tax incidence is closer to pre-GST levels. 

In August 2017, the GST Council had recommended raising the GST cess on large sedans and SUVs to 25%. Later that month, the union cabinet gave its approval for the revision in tax structure. But, the revised cess could only become applicable once the law was amended. 

Source: The Economic Times