Cabinet may hike in GST cess on cars

The Cabinet may this week consider issuing an ordinance to increase the cess on mid-size, large cars and SUVs, to 25% from 15% under the GST regime at present.

The GST Council, the apex tax rate-setting body under the Goods and Services Tax regime, had on August 5 approved raising cess on SUVs, mid-sized, large and luxury cars that had become cheaper post GST rollout on July 1.

But, for raising the cess requires an amendment to the Schedule of Section 8 of the GST (Compensation to a State) Act, 2017.

“The Cabinet will in the next few days consider amending that through the issue of an ordinance,” an official said. Views of ministries like road, transport and highways and heavy industries will be taken before hiking of the cess, the official added.

Under GST, a cess was levied on demerit goods like cars, tobacco and coal, to create a corpus for compensating states for any loss of revenue from their taxes like VAT being unified with central levies like excise duty and service tax in the GST.

Cars attract the top tax rate of 28%. On top of this, a cess of one to 15% is levied for the creation of the state compensation corpus.

To rectify the anomaly, the GST Council, headed by Union Finance Minister Arun Jaitley and comprising of representatives of all states, had on August 5 recommended that the Central government move legislative amendments required for increasing the maximum ceiling of cess leviable on motor vehicles to 25% from the present 15%.