Union Cabinet approves hike in cess on luxury cars, SUVs

31 August, 2017, 00:53 | Author: Barbara Daniel
  • GST collections touched Rs92,283 cr in July Jaitley

On the 5 day of August 2017, the GST Council had approved raising cess on SUVs, mid-size, large and luxury cars that had become cheaper post GST rollout on July 1.

The date for implementing the hike in the cess may be decided by the GST Council when it meets in Hyderabad on September 9. After Cabinet approval, the amendment to section 8 of the GST (Compensation to States) Act, 2017, will be passed through and ordinance, which requires the President's approval.

After the cabinet's nod, the government will reportedly have the authority to raise cess to 25% on vehicles with a capacity to carry up to 15 passengers.

The deadline for filing first monthly return and payment of taxes under GST - the new indirect tax regime that unifies over a dozen state and central taxes, including excise duty, service tax and VAT - ended August 25.

The total tax incidence, including the compensation cess on luxury cars and SUVs, had gone under the GST structure and the Finance Ministry had considered the issue.

"In the GST regime, over 34,000 traders have filed their first returns, which shows that there is no decrease in tax collection in the GST regime", Mr Kumar added. For example, small petrol cars which did not exceed 4 metres in length used to be levied 31.4% tax before implementation of GST.

Passing of ordinance to increase the limit of Cess to 25%, on certain class of vehicles, is along the expected lines. "Industry has made a representation to the Government and we await the final decision", said Dr. Pawan Goenka, Managing Director, Mahindra & Mahindra.

As per the tax sharing formula, the Centre will compensate states for any revenue loss calculated on a base year of 2015-16 and assumed revenue growth of 14 per cent. Cars under GST were taxed at the highest rate of 28% with additional cess ranging from 1% to 15%. Jaitley added, 64.42% tax payers paid Rs 92,283 crore so far in July.

"We earnestly hope the government and GST council will give due consideration to this matter and desist from raising the cess", Suri said.

"You will have to wait for few more months to study the pattern". Premium cars and SUVs are likely to see a sharper jump in prices after the new rates comes into effect and are consequently seeing stronger sales ahead of the hike.

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