Govt Keen on Swift Update of Law to Hike Cess on Big Cars
Likely to issue ordinance if Bill not introduced in current session, may seek GST Council’s nod as soon as possible
New Delhi: Having secured the Goods and Services Tax (GST) Council’s endorsement, the government wants to swiftly amend the law in the ongoing Parliament session itself to raise cess on mid-size, large cars and SUVs.
If it is unable to move the amendment this session, an ordinance will be issued, an official told ET.
“Council has already taken a call on the cess,” the official said. “Attempt now would be to move the enabling amendment soon.” The government could seek the GST Council’s nod as soon as the enabling provision is in place to quickly raise the cess. The GST Council had on Saturday empowered the Centre to raise the cess to 25% from 15% now for certain types of vehicles. ET reported the decision on Monday.
The higher cess could lift prices of even mid-sized se- commended that the central government may move legislative amendments required for increasing the maximum ceiling of cess leviable on motor vehicles falling under headings 8702 and 8703 to 25% instead of the present 15%,” the finance ministry said in a release on Monday. The decision on when to raise the cess will be taken by the GST Council in due course, it said.
The total tax on motor vehicles (GST plus compensation cess) has dropped from what it was before the levy was rolled out on July, the ministry said. An increase in cess will help the government raise revenue to pay compensation to the states for any revenue loss due to GST. The increase in compensation cess will require amendments to Section 8 of the GST (Compensation to a State) Act, 2017.
The vehicles that fall under headings 8702 and 8703 include mid-segment, large cars, racing cars, SUVs and motor vehicles that can carry more than 10 persons, but less than 13 such as station wagons. Also, hybrid vehicles with engine capacity of more than 1,500 cc and mid-segment hybrid cars of less than 1,500 cc fall in the category. Under the new GST regime, cars have been put in the highest tax bracket of 28%. Besides, a cess ranging from 1% to 15% is levied to create a corpus to compensate states for loss of revenue from GST implementation.
Higher cess could lift prices of even mid-sized sedans as it will apply to cars of over 4 m in length and 1,500-cc engine capacity
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