Lok Sabha passes bill for GST cess hike on luxury cars to 25%

All cars which have Engine capacity of Over 1500 cc comes under Luxury Segement which increase the prices of cars upto 10%. The Lok Sabha on Wednesday approved a bill to hike cess on luxury vehicles from 15% to 25% with a view to enhance funds to compensate states for revenue loss following the rollout of GST.

Finance Minister Arun Jaitley said the funds collected following hike in cess on luxury vehicles will be used to compensate states for revenue loss on account of implementation of the Goods and Services Tax (GST).

Participating in the discussion, members demanded that the GST rate should be reduced on a variety of items including sanitary napkins, agriculture equipments, handicrafts, handloom items and sports goods. Some members even suggested that there should be single tax slab instead of four.

GST Cess On Mid-Size, Luxury Cars, SUVs Increased

An ordinance suggested by the GST Council in September 2017 was expected to make all but hybrid, electric and small cars costlier by increasing the cess from 15 per cent to 25 per cent. A tamer version of that rule finally came into effect on September 9, 2017, which increased the additional cess on top of GST by 2, 5 and 7 per cent for midsize, luxury and SUV vehicles, respectively.

This time, however, the lower house intends to increase the tax only on luxury cars. By definition, that means any car longer than four meters and with an engine displacing more than 1.5-litre. Back in September, Hyundai took offence to the suggestion as the rule made the Verna a luxury car by definition and put it in the same slab as a Mercedes-Benz or a Ferrari.