The Narendra Modi government is ready to issue an ordinance over the coming weeks for increasing cess from 15 percent to 25 percent on luxury cars and Sports Utility Vehicles (SUVs). A tax official said that, a discussion happened in the Council under which modify some changes in tax rates to the planned cess imposed under the GST (Compensation to States) Act, 2017, and to reduce the tax burden on cars due to the implementation of the new regime.
Previously, Finance Minister said that the Council in its 20th meeting headed by Arun Finance Ministry organised on 5th August had considered the issues for increasing cess that can be imposed on automobile vehicles including sports utility vehicles (SUVs) and luxury cars.
According to the Government official notification, GST Council has suggested that the Central Government might take some legislative amendments decisions necessitate for enhancing the cess imposed on automobile vehicles under the head of 8702 and 8703 which includes all SUVs and luxury cars, it is expected that tax rates might enhanced from present 15 percent t0 25 percent.
A known person said, “Only after the ordinance has been passed, the Council can decide what should be the quantum of increase needed. The outer limit suggested is 25%.”
Four- wheelers or cars have put in the 28 percent highest slab rate under the Goods and Services Tax (GST). However, cars whom engine capacity over 1500 cc would levies 15 percent cess and cars above 1500 cc engine capacity would attract 28 percent cess. After the implementation of new indirect tax regime, the GST rates by adding cess on luxury cars, have fallen from 50 per cent to 43 per cent.
The next GST Council Meeting will held on 9th September in Hyderabad, which focus on solving issues related to the newly implemented GST such as payment and filing of returns. Apart from these, in the first week of September, it also focus on suggestions coming up in the meeting of chief commissioners of Central Board of Excise and Customs (CBEC).
Automobile manufacturers have expressed their concern to GST Council for increasing cess on luxury cars and SUVs. They also informing that the decision made by the Council will resultant in job losses and production costs. Dent the ‘Make in India’ initiative. “Businesses have to realize one thing. The Council’s effort was to keep tax rate fixation as revenue neutral as possible. This (reduced tax burden on cars) is an unintended mistake that needs to be corrected. Where the reduction is intentional, there is no rate revision,” said person. By adding that GST Council has kept the low tax rates on several items
So that the common enjoy the benefits of new indirect tax regime. R. Muralidharan, Senior Director at Deloitte India, said “We need to accept, while introducing a major tax reform like GST, there would be cases where GST rates could be more or less than erstwhile taxes in a few cases and if it is so due to a process of rationalization, we need to leave them as it is.”
