While all cars attract a peak GST rate of 28%, large motor vehicles, SUVs, mid-segment, large, hybrid cars and hybrid motor vehicles attract a cess of 15 % on top of it.
The Narendra Modi government on Wednesday approved the hike in the levy on luxury cars and sports utility vehicles to 25% from 15%. The new levy is in addition to taxes on the sale of luxury vehicles, reported news agency Reuters.
In the past, Finance Minister Arun Jaitley had also said that GST Council in its 20th meeting held on August 5 considered the issue of raising cess after total tax incidence on motor vehicles has come down due to the rollout of GST.
A government notification earlier had said that the GST Council had suggested the government to move legislative amendments required for increasing the maximum ceiling of cess leviable on motor vehicles falling under headings 8702 and 8703 including SUVs.
The vehicles that fall under headings 8702 and 8703 include mid-segment, large cars, SUVs and motor vehicles which can carry more than 10 persons, but less than 13.
Also, hybrid vehicles with engine capacity of more than 1500 cc and mid segment hybrid cars of less than 1500 cc fall in the category.
Under the new GST regime, cars attract the top tax rate of 28 %. On top of this, a cess of 1-15 % is levied on them to create a corpus to compensate states for loss of revenue from GST implementation.
The Goods and Services Tax (GST) Fitment Committee -- which is responsible for calculating the tax rates on various goods and services -- at its meeting on July 25 felt that the total tax incidence in GST seems to have come down vis-a-vis pre-GST total tax figure.
The highest pre-GST tax incidence on motor vehicles worked out to about 52-54.72 %, to which 2.5 % was added on account of CST, octroi etc. Against this, post- GST, the total tax incidence came to 43 %.
After 28 % GST, to maintain the pre-GST tax incidence, the highest compensation cess rate required will have to be 25 %, the fitment committee felt. Against this, the ceiling rate of compensation cess on motor vehicles is 15 %.
(With inputs from agencies)
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