The Union Cabinet recently approved changes in GST cess on cars. This news comes after GST Council decided to increase GST cess on few cars. If you look carefully then you can observe that there have been many changes in prices of cars because of Goods and Services Tax. Union Cabinet however took some time to select cess on different categories of cars and this delay in decision was a result of many discussions between officials.
Change in cess charges on cars post GST
GST Council also approved report on increase in cess in various segments of cars on 5 August itself. But this increase effected only luxury cars apart from SUVs and large or mid – sized cars. On other hand after announcement of Goods and Services Tax on 1 July 2017 there was a sharp decrease in prices of all cars but again with this new change of cess charges there will be variation in car price.
We could also see that prices of many SUVs came down from 1 lakh to 3 lakhs from the time Goods and Services Tax implemented in the state of India; and there are many reasons behind this kind of change while one of them is that earlier authorities levied numerous taxes on automobiles.
Some of these taxes on automobiles were VAT or Value Added Tax, Service Tax and Excise Duty along with other Central / State Taxes. Still because of implementation of GST tax rates authorities had to remove all of above taxes; this decision led to decrease in prices of cars.
Find out new GST tax rates which will be helpful in future.
Current GST on cars
As of now GST cess on cars in SUV, mid and large size luxury cars is 15 % and recently Union Cabinet cleared a law saying that there will be increase of cess on GST. However to create this change authorities should make some changes in the GST law. Therefore authorities will be modifying ‘Schedule of Section 8 in GST (Compensation to State) Act of 2017.
After modification of Schedule of Section 8 in GST Act, cess on luxury segment cars will be 25 %. Even Arun Jaitley, Finance Minister of India revealed that Union Cabinet approved ordinance on cess hike. Another aspect of GST is that maximum GST tax rate slab is 28 % so total levies come up to 43 %. Looking at these numbers it is now to see what will GST Council support.
Even Finance Ministry in Cabinet sessions chaired by Prime Minister Narendra Modi had taken up discussion of GST cess increase on cars because currently there is no change in cess of smaller automobiles but there is huge difference on higher end automobiles. However final decision on increase in GST cess on automobiles will happen after GST Council meet on 9 September 2017.