SUVs, Luxury SUVs To Cost More As GST Council Approves Hike in Cess

The Goods and Service Council has approved Centre's request to increase the cess on SUVs and luxury SUVs to 25 per cent from 15 per cent.

By Pratik Rakshit

1 mins read

Published on August 7, 2017

Highlights

The current cess levied on SUVs and luxury SUVs is 15%
The Centre wants the cess to be increased to 25%
The prices of these vehicles will not be increased immediately

The Goods and Service Tax (GST) Council on Sunday approved an amendment that will see an increase in the current cess levied on Sport Utility Vehicles (SUVs) and high-end luxury SUVs from current 15 per cent to 25 per cent. This comes after the Centre, along with several states requested the GST council to amend the current cess on these vehicles as an "anomaly" has crept in while deciding the rates, that needed rectification. The council was headed by Finance Minister Arun Jaitley. (Jaguar F-Pace) Also Read: GST Impact On Cars And SUVs Arun Jaitley, Minister of Finance said, "GST Council in its 20th Meeting held on 5th Aug, 2017 considered the issue that total tax incidence on motor vehicles after GST has come down. It recommended that Central Government may move legislative amendments to increase max ceiling of cess on motor vehicles to 25 per cent from present 15 per cent. However, the decision on when to raise the actual cess leviable on the motor vehicles will be taken by the GST Council in due course." GST Council in its 20th Meeting held on 5th Aug,2017 considered the issue that total tax incidence on motor vehicles after GST has come down — Ministry of Finance (@FinMinIndia) August 7, 2017 undefined It recommended that Central Govt may move legislative amendments to increase max ceiling of cess on motor vehicles to 25% from present 15%. — Ministry of Finance (@FinMinIndia) August 7, 2017 undefined However, the decision on when to raise the actual cess leviable on the motor vehicles will be taken by the GST Council in due course. — Ministry of Finance (@FinMinIndia) August 7, 2017 undefinedUnder the GST rates, cars will attract the top rate of 28 per cent with a cess in the range of 1-15 per cent on top of it. While small petrol cars with engine less than 1,200 cc will attract 1 per cent cess, that with a diesel engine of less than 1,500 cc will attract 3 per cent cess. Large cars with engine greater than 1,500 cc and SUVs with length more than 4 metres and engine greater than 1,500 cc will attract a cess of 15 per cent. This is levied on top of the 28 per cent that is already in place, which adds up to a total of 43 per cent. An additional 10 per cent increase will increase the GST rate on these SUVs to 53 per cent. However, the prices of these vehicles will not be increased immediately as it requires amendment to the GST compensation law and will only come into effect next month. (BMW X3) There is mutual consent amongst members of the GST Council to have cess on high-end luxury cars and SUVs to be on the higher side so that it can be increased if the need arises. Moreover, under the Compensation to the States for Loss of Revenue Bill, 2016, the Centre will compensate the states for any loss in revenue due to the implementation of GST for a period of 5 years. Also Read: GST Discounts On Cars Post July 1, several automakers passed on the GST benefits to its customers ranging from Rs 1,300 to Rs 10 lakh. Car-makers like Mercedes-Benz, BMW, Audi, JLR, Bentley, Hyundai etc offer high-end luxury SUVs in India. (Mercedes-AMG GLC 43 Coupe) Commenting on the government's decision over the additional cess, Mercedes-Benz India MD & CEO, Roland Folger said, "We are highly disappointed with the decision. We believe this will be a strong deterrent to the growth of luxury cars in this country. As a leading luxury car maker, this will also affect our 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. We feel deprived as the leading manufacturer of luxury cars in India, who has been championing 'Make in India'. This decision will also reverse the positive momentum that the industry wanted to achieve with the introduction of GST. With this hike in cess, we expect the volumes of the luxury industry to decelerate, thus offsetting any growth in the potential revenue generation, that could have come with the estimated volume growth." "This decision once again reiterates the need for a long-term roadmap for the luxury car industry, which has been at the receiving end of arbitrary policies. The constant shift in policy makes our long-term planning for the market highly risky, and we think this would only have an adverse impact on the country's financial ratings. By making better technology more expensive, the Government is causing more damage to the environment and slowing down the overall growth pace of the country's economic growth, which it is striving to achieve." Rahil Ansari, Head, Audi India said, "Luxury car industry in India, while small in volumes, still contributes over 10 percent in value. The taxes on this industry were already very high and we expected the unfulfilled potential of this segment to increase after the implementation of GST and rationalization of taxes. However, the proposal of further increasing the Cess on the luxury car industry will dampen the spirits of not only the companies, dealers and customers but also workers and employees working in this industry. This proposed increase in Cess will most definitely adversely impact the sales. We will be forced to re-evaluate our business plans in light of this development. This move unfortunately is against the spirit of liberal market dynamics and we can only request to reconsider this proposal." He added, "Keeping in mind the proposed increase in cess, we have introduced "Unbeatable" offers on our best-selling cars, this is an opportune time to join the Audi family and additionally also benefit from the privileges of the Audi Club India. Customer Delight is at the centre of Audi's focus and we are sure that the current offers will delight the Audi enthusiasts."