GST on Luxury Cars, SUVs revised to 50% (28% GST + 22% Cess)

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The council, headed by Finance Minister Arun Jaitley, however, decided not to levy any additional tax on small petrol and diesel cars of up to 1200 cc as well as on hybrid ones.

Almost 72 days after the government implemented the biggest tax reform in the country bringing auto prices to a new low, the GST Council on Saturday hiked cess on mid-sized, luxury and SUV cars which is likely to raise vehicle prices to pre-GST level.

Accordingly, plastic raincoats and rubber bands have been fitted in the slab of 18 per cent and 12 per cent respectively against the earlier slab of 28 per cent. Idli/dosa batter will attract 12 per cent GST, against 18 per cent earlier while brooms and brushes have been totally exempted from the levy. The council, in its earlier meetings, had recommended revising the Cess to be 25%, making the total effective tax rate to 53%.

The new GST cess update is still considerably lower than the 10 per cent flat increase in the cess, that was predicted by the automobile industry. Last week, an ordinance was promulgated to hike the cess from 15% to up to 25%. The cess hike on mid-size sedans has taken the tax incidence to a pre-GST level.

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Manufacturers are still awaiting the exact definition of categories and whatever is the impact of the increased cess, it will reflect in the revised pricing from the effective date. The luxury cars term has not been announced clearly by the council.

While these auto segments were the most to benefit in the previous GST rates, as it was much lower than the pre-GST rates. The current GST rate of 48% means that it is just lower by 0.5% than the pre-GST levels. Initially, the cess was proposed to be raised by a maximum of 10%.

Cotton quilts costing up to Rs 1,000 will attract 5 percent while those above that will face 12 percent GST, against the earlier uniform rate of 18 percent.

"In FY18, CARE Ratings expects passenger vehicles segment to witness gradual pickup in demand as the effect of demonetisation, ban on BS-III vehicles and GST implementation begins to moderate starting Q3 FY18. Also, improved consumer sentiments post the Seventh Pay Commission is expected to boost the demand", the report said.

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