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Published: Thu, September 14, 2017
Global Media | By Abel Hampton

GST on Luxury Cars, SUVs revised to 50% (28% GST + 22% Cess)

GST on Luxury Cars, SUVs revised to 50% (28% GST + 22% Cess)

After the Council meeting in Hyderabad on September 9, Union Finance Minister Arun Jaitley said that while status quo has been maintained for small cars (petrol and diesel), hybrid cars and 13-seater vehicles, the GST Council chose to increase the cess rates for some segments. According to the final notification though, the hike isn't all that steep, with mid-size cars attracting a 2% hike, premium sedans witnessing a 5% increase and SUVs attracting the sharpest hike at 7%.

It was on September 9, that the GST council taking the effective GST rate to 45%, has made a decision to hike cess on mid-sized cars by 2%. The Central Board of Excise and Customs (CBEC) said that, The increase in compensation cess for mid-segment and large cars, as decided in the 21st GST Council meeting on Saturday, would be effective from Monday. The tax on all these segments of cars was earlier 43%, including 15% cess and the highest percent of GST. Total tax incidence on SUVs goes up to 50% with a 7% increase in cess (28% gst+22% cess). After July 1st, a flat rate of (28% + a 1% cess) meant that vehicles in this category were charged a 29% tax, which will remain unchanged even after this new approval. "Whatever is the impact of the increased cess will reflect in the revised pricing from the effective date".

After the GST council meet, Finance Minister Arun Jaitley had said that in large vehicles where affordability of consumers is high, the cess has been increased.

While automobile companies expect this change in the GST rate to have a negative impact on the auto sales, the impact may be limited. The new rate might get effective starting October 1st. The government has left small cars, electrics and hybrids unaffected for they occupy a major share in the automobiles sold in the country. The items include the daily used items like idli/dosa batter, raincoat, brooms, corduroy fabric, computer monitors up to 20 inches, cotton quilts, rubber bands and kitchen gas lighters are expected to cost less now under the GST regime after the lowering of rates by the GST Council.

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