GST Coun­cil Ap­proves Hike in Lux­ury Car Cess

Cess to go up to 25% post changes in GST com­pen­sa­tion law

The Economic Times - - Front Page - @times­group.com

New Delhi: Think­ing of buy­ing an SUV or a lux­ury sedan? You might want to hurry up and de­cide quickly as the Goods and Ser­vices Tax Coun­cil is said to have de­cided to raise the cess on lux­ury au­to­mo­biles to 25% from 15% now.

To be sure, the rates may not go up im­me­di­ately as any in­crease in the cess will re­quire an amend­ment to the GST com­pen­sa­tion law. “The coun­cil ap­proved an amend­ment to the GST law to en­able an in­crease in the rate of levy of com­pen­sa­tion cess,” said a gov­ern­ment of­fi­cial aware of the coun­cil’s de­lib­er­a­tions on Satur­day.

The over­all view within the coun­cil was to have the cess on high-end au­to­mo­biles pegged higher so that it can be in­creased if the need arises, the of­fi­cial added.

Cars have been placed in the high­est 28% tax bracket un­der GST, which has re­placed 17 state and cen­tral taxes as also 23 cesses. It should be noted that the GST Coun­cil has al­ready set the max­i­mum levy in­clu­sive of cess at 40%.

Small petrol cars of 4 me­tres length and up to 1,200 cc en­gine ca­pac­ity at­tract a 1% cess while diesel cars of that length and up to 1,500 cc ca­pac­ity face a 3% cess. The cess on mid-size, large cars or SUVs is 15%, which added up to a re­duc­tion in levies on some mod­els un­der the GST regime.

Costly Wheels

A num­ber of car mak­ers had cut prices af­ter the roll­out of GST on July 1 to pass on the re­duc­tion to buy­ers. How­ever, some car mak­ers had to raise prices of small cars af­ter the cess was im­posed on them. The gov­ern­ment main­tains that in­dus­try stands to ben­e­fit from seam­less in­put tax credit and should help re­duce prices over­all.

The Cen­tre in­tro­duced a sep­a­rate GST (Com­pen­sa­tion to the States for Loss of Rev­enue) Bill, 2016, for the im­po­si­tion of a cess on cer­tain lux­ury goods and so-called sin goods to com­pen­sate states for any loss of rev­enue due to the im­ple­men­ta­tion of GST. A pro­vi­sion to com­pen­sate states was also made in the con­sti­tu­tional amend­ment that makes it manda­tory for the Cen­tre to pro­vide for com­pen­sa­tion to the states for loss of rev­enue aris­ing on ac­count of im­ple­men­ta­tion of the GST for a pe­riod of five years.

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