Cess on SUVs and luxury cars hiked to 25 per cent

Goods and Service tax (GST) cess on luxury and sports utility vehicle has been hiked from 15 per cent to 25 per cent by the Union Cabinet. In effect since 1 July, all cars in the country have been attracting a basic GST of 28 per cent. Under fresh revision, vehicles with engine capacity of over 1,500cc , measuring over 4-metres in length will attract an additional cess of 10 per cent, thereby bringing it to 25 per cent. The hike in cess will lead to price hike of large cars as well as SUVs in India.

After the introduction of GST, the total tax incidence on motor vehicles (GST plus compensation cess) has come down when compared to the total tax incidence in the pre-GST regime. To rectify the anomaly, the GST Council, which comprised of representatives from all states, recommended on 5 August that the Central government move legislative amendments required to increase the cess. In order to effectively introduce revision in cess, the council encouraged amendment to the Schedule of section 8 of the GST (Compensation to a State) Act, 2017.  

Roland Folger, MD and CEO of Mercedes-Benz India has stated that the prices will be higher than the pre-GST era and all the announcements claiming that the GST will be a benefit to the people won't be true. He also stated that prices might be hiked by 5 per cent as compared to pre GST prices.