Buyers of high-end cars and SUVs who had been a happy lot in paying lower tax after the rollout of goods and services tax (GST) stand to lose their grins soon. 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.
This increase will land the total indirect taxes on such vehicles closer to their pre-GST rates. However, as to when this amendment in the cess will be announced remains to be seen.
As per the current tax structure from July 1, SUVs as well as cars more than 4 metres in length and engine capacity greater than 1,500cc attract GST of 28 per cent and cess of 15 per cent for total indirect tax of 43 per cent.
Incidentally, the same tax slab also applies to mid-size cars (less than 4m in length) as well as hybrid vehicles. This had been a cause for ire among makers as well as buyers of these categories of cars. While a proposal to decrease cess on hybrid vehicles has been rejected, news reports suggest that the government will announce higher cess on bigger cars and SUVs.
According to a news report on Monday, states and the Centre are mulling to increase this cess to 25 per cent. With this, the total indirect taxes on SUVs and luxury cars will increase to 53 per cent. It should be noted that pre-GST taxes on SUVs amounted to 55.3 per centand those on bigger cars stood at 51.8 per cent.
The GST Council may discuss this issue of increasing compensation cess during its meet at Hyderabad next month and announce the changes through an amendment to the act. However, the timing of the amendment and its announcement would be decided by the Centre.