Luxury cars to cost more as GST cess hiked to 25%

SUVs, mid-sized, large and luxury cars that had become cheaper after GST rollout on July 1 will cost more as the GST Council has approved a proposal to hike cess on them to 25 per cent, from 15 per cent now. Under the new GST regime, cars attract the top tax rate of 28 per cent. On top of this, a cess of 1-15 per cent is levied on them to create a corpus to compensate states for loss of revenue from GST implementation.

The finance ministry, in a statement, said that after introduction of GST, the total tax on motor vehicles (GST plus compensation cess) has come down vis-avis the total incidence in pre-GST regime.

"The GST Council considered this issue in its 20th meeting held on August 5 and recommended 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 per cent instead of the present 15 per cent," the statement read, reports PTI.

The decision on when to raise the actual cess leviable on the same will be taken by the GST Council in due course, it added. The increase in compensation cess will require amendment to the Schedule 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, SUVs and motor vehicles which can carry more than 10 persons, but less than 13.