(Image source from: Hindustantimes.com)
Cabinet Clears Ordinance To Allow Hike In GST Cess On Cars:- The declaration of an Ordinance to increase the cess on mid-size, large cars and SUVs from current 15% under the new GST regime was cleared by the cabinet on Wednesday. The proposal before the Cabinet was to hike the cess rate on these cars to 25%.
A source, after the cabinet meeting, said “The proposal of imposition of higher cess has been cleared.” On August 5, the GST council had approved raising cess on SUVs, mid-size, large and luxury cars. The cess had become cheaper post GST rollout on July 1.
An amendment to the Schedule of section 8 of the GST (Compensation to a State) Act, 2017, is required for raising the cess. The highest pre-GST tax incidence on motor vehicles worked out to about 52-54.72%, to which 2.5% was added on account of Central Sales Tax, octroi etc.
The total incidence came to 43%, post-GST. So, the highest compensation cess rate required is 25%, to take the tax incidence to pre-GST level.
Following the implementation of GST, the prices of most SUVs were cut between Rs 1.1 -3 lakh. This has included over a dozen central and state levies like excise duty, service tax, and VAT from July 1. The cuts will be reversed, with the increase in cess. Access was levied on demerit goods like cars, tobacco, and coal under GST. This was done to create a corpus for compensating states for any loss of revenue from their taxes like VAT being unified with central levies like excise duty and service tax in the GST.
The top tax rate of 28% is attracted by the cars. On top of this, for the creation of the state compensation corpus, a cess of 1-15% is levied.
The GST council may decide on the date when the increased cess will be applicable in its next meeting on September 9.