The Union Cabinet on Wednesday approved the hike in cess on luxury cars and SUVs to be increased to 25 per cent from current 15 per cent. The government will now push for a Presidential nod soon for hiking maximum cap of cess. The Central Board of Excise and Customs (CBEC) will issue cess hike notification post the President gives his approval. The Cabinet's nod allows the government to increase the cess on luxury cars, SUVs via an ordinance. It will now put forward a formal notification to the GST Council in the September 9 meet.
Prices of most SUVs were cut between Rs 1.1 lakh and Rs 3 lakh following the implementation of GST, which subsumed over a dozen central and state levies like excise duty, service tax, and VAT from July 1. On top of this, a cess of 1 to 15 per cent is levied for the creation of the state compensation corpus.
The GST Council, to rectify the anomaly, headed by Union Finance Minister Arun Jaitley and comprising representatives of all states, had on August 5 recommended that the Central government for increasing the maximum ceiling of cess leviable on motor vehicles to 25 per cent from present 15 per cent move legislative amendments required.
The GST Council will decide on the date, once the law is amended when the increased cess will be applicable, the official said, adding the next meeting of the panel is scheduled on September 9 to be held in Hyderabad. The highest pre-GST tax incidence on motor vehicles worked out to about 52-54.72 per cent, to which 2.5 per cent was added on account of Central Sales Tax, octroi etc. Against this, post-GST the total tax incidence came to 43 per cent.
Managing Director, Roland Folger of Mercedes Benz India, said that the situation may go back to "square one" due to levy of cess for large cars and Sports Utility vehicles if government does not intervene.
The tax incidence to pre-GST level, so, to take the highest compensation cess rate required is 25 per cent. Presently, large motor vehicles, SUVs, mid-segment cars, large cars, hybrid cars and hybrid motor vehicles attract a cess of 15 per cent on top of 28 per cent GST.