The Union cabinet has approved the ordinance for raising the goods and service tax (GST) cess on luxury and sports utility vehicles to 25 per cent from 15 per cent. In effect since 1 July, all cars have been attracting a basic GST of 28 per cent. Under fresh revision, vehicles with an engine capacity of over 1,500cc and measuring over 4-metres in length will attract an additional cess of 10 per cent, thereby bringing it to 25 per cent. This means that the prices for large cars and SUVs in the country will go up in the days to come.
After the introduction of GST, the total tax incidence on motor vehicles (GST plus compensation cess) has come down when compared to the total tax incidence in the pre-GST regime. To rectify the anomaly, the GST Council, which comprises of representatives from all the states, recommended on 5 August, that the Central government move legislative amendments required to increase the cess. In order to effectively introduce a revision in cess, the council encouraged amendment to the Schedule of section 8 of the GST (Compensation to a State) Act, 2017.
Roland Folger, MD and CEO of Mercedes-Benz India has stated that the prices will be higher than the pre-GST era and all announcements claiming that the GST will be a benefit to the people won't be true." He also stated that prices might be hiked by 5 per cent as compared to pre-GST prices.
