Goods and Service Tax (GST) Cess on SUVs and luxury cars could be hiked within weeks as government plans to bring in an ordinance. GST Council had earlier this month approved a hike in cess on luxury cars from 15 per cent to 25 per cent.
According to a Livemint report, a cabinet note is being moved proposing changes to the schedule of cess levied under the GST (Compensation to States) Act, 2017, to correct the reduction in tax burden on luxury cars due to GST rollout.
Finance Minister Arun Jaitley had earlier said that GST Council in its 20th meeting held on August 5 considered the issue of raising cess after total tax incidence on motor vehicles after GST has come down.
GST Council recommended that central government may move legislative amendments required for increase the maximum ceiling of cess leviable on motor vehicles falling under headings 8702 and 8703 including SUVs, to 25 per cent instead of present 15 per cent, a government notification said.
Under the Goods and Service Tax (GST), cars have been placed in the highest tax bracket of 28 per cent. In addition to 28 per cent tax, cars with engine capacity of over 1,500 cc attract a 15 per cent cess over and above peak rate of 28 per cent. After GST implementation, tax including cess on luxury cars and SUVs came down from 50 per cent to 43 per cent.
The hike in cess on luxury sedans and SUVs could play a dampener for car manufacturers who had cut prices to pass on the benefits to buyers after GST implementation.
Mercedes-Benz the leader of the luxury pack had said that the new decision will affect their future plans of expansion under 'Make in India' initiative, which aims at making and selling world-class products in India, with the latest technology for end consumers.
The luxury segment had been facing reverses in the Indian market over spate of issues, right from the diesel ban in Delhi NCR last year that negatively impacted the sales for luxury brands.