Elevated Rate of Cess under GST on SUVs, Large Cars and Luxury Vehicles Applicable from Today

The 2nd GST Council meet on September 9 witnessed an elevated rate of cess which will be applicable from Monday i.e. September 11 today onwards.

The CBEC tweeted that this rate of higher compensation cess on mid-sized, large cars and SUVs will be applicable from 12 am on September 11th.

The rate of increase on mid sized cars is by 2% resulting into a total of 45% rate of GST; on large cars, the increase is by 5% resulting in 48% GST rate on large cars and on SUVs the cess had been increased by 7% which makes a total of 50%.

As per a statement by the Finance Minister – Arun Jaitley, the reason for increase in compensation cess of large sized cars and SUVs by 5% and 7% respectively, is the high affordability of the section that purchases such cars. A move that was clearly hinted while rolling out GST and meant higher Tax on Luxury items.

Earlier speculations were riff that the GST Cess hike could put an additional 10% burden on luxury cars segment however the highest increase accounts to 7% additional cess on SUVs.

"The pre-GST rate has not been restored... Even though we had a headspace of hiking cess by 10 per cent, it has been hiked by up to 7 per cent," stated Arun Jaitley.

On the other hand, the cess applicable on small cars whether petrol or diesel along with hybrid cars and the ones that have the carrying capacity of up to 13 passengers has not seen any change in the rate of GST. This definitely comes as a breather to common man.

This increase in taxes was done so as to get rid of the irregularity in the tax regime as the taxes imposed under the pre-GST regime were higher than the taxes imposed under the GST regime thus, the prices of cars saw a decrease of up to ₹3 Lakhs.

Now, the cars are subject to the rate of 28% GST specified for the highest tax slab along with the elevated rate of cess.

In contrast to the present tax of 43% under GST, the pre-GST taxes came up to a total of 52-54.72% along with an additional 2.5% owing to central sales tax, octroi, etc.

The various car companies like Audi, Mercedes-Benz and JLR India are discontent and disappointed of this decision by the GST Council and believe that this will affect their sales and in turn their FDI decisions in future.