CABINET APPROVES ORDINANCE FOR CESS HIKE ON LUXURY CARS, SUVS

The Union cabinet on Wednesday approved an ordinance enabling the government to raise the goods and services tax (GST) cess on medium-to-large cars and SUVs to 25% from 15%. The ordinance is expected to precede a September 9 meeting in Hyderabad of the GST Council, the federal body that decides on all indirect tax matters, which may decide where to finally fix the cess, which is now at 15%. Prices of most SUVs were cut by between ₹1.1 lakh and ₹3.5 lakh after GST implementation.

NEW DELHI: The Union cabinet on Wednesday approved an ordinance enabling the government to raise the goods and services tax (GST) cess on medium-to-large cars and SUVs to 25% from 15%.

The ordinance is expected to precede a September 9 meeting in Hyderabad of the GST Council, the federal body that decides on all indirect tax matters, which may decide where to finally fix the cess, which is now at 15%. Prices of most SUVs were cut by between ₹1.1 lakh and ₹3.5 lakh after the implementation of GST on July 1. As a result, Maruti Suzuki India Ltd’s domestic sales rose 22.4% in July from a year ago. Sales at Mahindra and Mahindra Ltd and Toyota Kirloskar Motor Pvt. Ltd grew 21% and 43%, respectively. Any upward revision in cess will lead to a rise in prices of bigger vehicles.

Finance minister Arun Jaitley told reporters said the approval was for an ordinance to amend the GST (Compensation to States) Act, 2017 to increase the statutory limit on the cess on some motor vehicles. The cess will help the Centre compensate states for any revenue loss during the first five years after the implementation of GST. Accordingly, the upper limit of cess that can be imposed by the government on motor vehicles with a capacity to carry 13 people, vehicles with 10-13 people capacity, mid-segment cars with engine capacity less than 1500cc and large segment cars with higher engine capacity, sports utility vehicles (SUVs) and hybrid vehicles will go up to 25% once the ordinance is promulgated.

The upper ceiling on small petrol and diesel cars less than 4 metres long, which currently attract cess of 1% and 3%, respectively remain unchanged.