New Delhi, August 30: The Union Cabinet on Wednesday gave its nod to increase the cess on luxury cars and sport utility vehicles. The cess has been increased to 25 per cent from existing 15 per cent which will make cars expensive now. The new development comes in the wake of implementation of Goods and Services Tax regime.Also Read - Swiggy, Zomato Will Now Pay GST on Restaurant Services Supplied Through Them, Says Sitharaman

Prices of most SUVs were cut between Rs 1.1 lakh and Rs 3 lakh following the implementation of GST. It subsumed over a dozen central and state levies like excise duty, service tax and VAT from July 1. Also Read - Central Govt Panel Plans to Bring Petrol, Diesel Under GST: Report

The GST Council 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 raising the cess requires an amendment to the Schedule of section 8 of the GST (Compensation to a State) Act. Also Read - Viral Videos: Taliban Militants Ride in Bumper Cars With Guns, Have Fun at Kabul Amusement Park After Capturing Afghanistan | Watch

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 per cent. On top of this, a cess of 1 to 15 per cent is levied for the creation of the state compensation corpus.

The highest pre-GST tax incidence on motor vehicles worked out to about 52-54.72 per cent, to which 2.5 per cent was added on account of Central Sales Tax, octroi etc. Against this, post-GST the total tax incidence came to 43 per cent.