To mitigate an "anomaly" in the tax structure for SUVs and luxury cars, states and the central government plan to increase cess on these categories of vehicles from 15 per cent to 25 per cent. 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. The official Twitter handle of the ministry also stated that GST Council will take the decision on when to raise the actual cess on motor vehicle in due course of time.
The proposal to raise the ceiling of cess covers large motor vehicles with capacity for 10-13 persons, mid segment and large cars, sports utility vehicles, mid segment hybrid cars and other hybrid vehicles, all of which at present attract 15% cess. Also the small petrol cars had a cess of 1 per cent, while the cess for small diesel cars was at 3 per cent.
The hike in cess on luxury sedans and SUVs could play a play a dampener for auto manufacturers which had cut prices to pass on the benefits to buyers after GST implementation.
Tata Motors-owned Jaguar Land Rover had reduced prices of its entire vehicle range in India on an average by 7 per cent to pass on benefit of reduced tax incidence under GST. "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".
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Under the Goods and Service Tax (GST), cars have been placed in the highest tax bracket of 28 per cent. PTI reported on 19 July that Fiat Chrysler Automobile (FCA) India Pvt.
Hybrid cars have been slapped with 43 per cent tax rates under the new regime, where they were taxed below 31 per cent earlier.
Merely a week after the rollout of GST, the government had warned manufacturer, importer and sellers of pre-packed goods of penalties ranging from fines up to Rs 1 lakh or prison terms up to a year for repeat offence of not printing the post-GST rates on product labels.
States are pitching for changes in tax rates on a few other items.
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