New Delhi, August 7: The Goods and Services Tax (GST) Council on Monday authorised the Centre to raise the cess on SUVs and luxury cars from 15% to up to 25%. The Finance Ministry in its statement said, “GST Council in its 20th Meeting held on August 5, 2017, considered the issue that total tax incidence on motor vehicles after GST has come down”. “It recommended that Central Govt may move legislative amendments to increase the max ceiling of cess on motor vehicles to 25% from present 15%,” the Finance Ministry further tweeted. According to the new development, SUVs, mid-sized, large and luxury cars that had become cheaper after GST rollout on July 1 will cost more as a proposal to hike cess on them has been approved. The cess on SUVs and luxury cars is currently 15 per cent and shall be hiked to up to 25%.Also Read - BMW Becomes Top Luxury Car Seller In USA For Third Consecutive Year, Beats Lexus, Mercedes

Prices of most SUVs were cut between Rs 1.1 lakh and Rs 3 lakh following implementation of GST, which subsumed over a dozen central and state levies like excise duty, service tax and VAT, from July 1. The finance ministry, in a statement, said that after the introduction of GST, the total tax on motor vehicles (GST plus compensation cess) has come down vis-a-vis the total incidence in the pre-GST regime. The GST Council had%, 18% and 28% and cars attracted the top tax rate of 28 per cent. Moreover, a cess of 1-15 per cent is levied on them to create a corpus to compensate states for loss of revenue from GST implementation.  “The GST Council considered this issue in its 20th meeting held on August 5 and recommended that the central government may move legislative amendments required for increasing the maximum ceiling of cess leviable on motor vehicles falling under headings 8702 and 8703 to 25 per cent instead of the present 15 per cent,” the statement read. Also Read - GST Council Meet: FM Sitharaman May Defer Tax Hike on Textile, Footwear

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During its meeting on July 25, the Goods and Services Tax (GST) Fitment Committee that is responsible for calculating the tax rates on various goods and services felt that the total tax incidence in GST seems to have come down vis-a-vis pre-GST total tax figure. The vehicles that fall under headings 8702 and 8703 include mid-segment, large cars, SUVs and motor vehicles which can carry more than 10 persons, but less than 13. Also, hybrid vehicles with engine capacity of more than 1500 cc and mid segment hybrid cars of less than 1500 cc fall in the category. According to reports by PTI, the decision on when to raise the actual cess leviable on the same will be taken by the GST Council in due course whereas the increase in compensation cess will require an amendment to the Schedule to section 8 of the GST (Compensation to a State) Act, 2017.

After 28 per cent GST, to maintain the pre-GST tax incidence, the highest compensation cess rate required will have to be 25 per cent, the fitment committee felt. Against this, the ceiling rate of compensation cess on motor vehicles is 15 per cent. While all cars attract a peak GST rate of 28 per cent, large motor vehicles, SUVs, mid-segment, large, hybrid cars and hybrid motor vehicles attract a cess of 15 per cent on top of it. Small petrol cars of less than 4 metres and 1200 cc are marked for a cess of 1 per cent while small diesel cars of less than 4 meters and 1500 cc engine are levied a cess of 3 per cent.  As per PTI reports, the cess collected on cars as also tobacco and coal will be used to compensate the revenue loss of states by implementing GST. For this, a separate statute has been passed by Parliament. This prescribes the maximum cess rate.  And now, to change that cess rate, an amendment to this law will be needed.