GST impact on motor vehicles: Council okays hike in cess on SUVs, luxury cars from 15 to 25%

Goods and Services Tax (GST) Council, in its 20th meeting on August 5, authorised the Union government to move legislative amendments to increase ceiling of cess on motor vehicles to 25 per cent from present 15 per cent, the Finance Ministry informed on Monday. The official Twitter handle of the ministry also stated that GST Council will take the decision on when to raise the actual cess on motor vehicle in due course of time. “GST Council in its 20th Meeting held on 5th Aug, 2017 considered the issue that total tax incidence on motor vehicles after GST has come down. It recommended that Central Govt may move legislative amendments to increase max ceiling of cess on motor vehicles to 25% from present 15%,” the Finance ministry tweeted.

“However, the decision on when to raise the actual cess leviable on the motor vehicles will be taken by the GST Council in due course,” it added. As per council’s earlier decision, large motor vehicles including SUVs, mid-segment cars, large cars, hybrid cars and even hybrid motor vehicles had a cess of 15 per cent in addition to the GST rate of 28 per cent. Also the small petrol cars had a cess of 1 per cent, while the cess for small diesel cars was at 3 per cent.

As per a PTI report, the finance ministry had recently said that after introduction of GST, the total tax on motor vehicles (GST plus compensation cess) has come down vis-a-vis the total incidence in pre-GST regime.

The GST Fitment Committee, which is accountable for calculating the tax rates on various goods and services, during its meeting on July 25 felt the total tax incidence in GST seems to have come down vis-a-vis pre-GST total tax figure. The highest pre-GST tax incidence on motor vehicles worked out to be around 52-54.72 per cent, to which 2.5 per cent was added on account of CST, Octroi etc. Against this, post-GST amendment, the total tax incidence came to 43 per cent.