SUVs and luxury cars will soon be more expensive in India, while the Union government issued an order Wednesday to increase 15% to 25%.
SUVs and luxury cars became cheaper under the new tax system of goods and services that was introduced on July 1 with some of the premium models with a cut price as high as Rs 10 lakh.
Cess is an additional fee on cars that fall within the upper limit of the GST tax of 28%. The previous ticket ranged from 1-15%, with cheaper and less polluting cars, like small hatchbacks with frugal gasoline engines that attract a lower rate.
The date of implementation of the increase of the upper limit of the passage from 15% to 25% will be decided by the GST Council when it meets in Hyderabad on 9 September, according to sources.
The upper limit rate applies to cars such as Toyota Fortuner (SUV) and BMW, Audi and Mercedes sedan.
Cars under 4 meters attract 1% if they have a gasoline engine with a capacity of up to 1,200 cc; or 3% if it works with a diesel engine of less than 1500 cc.
These also include non-hatchback models, such as the DZire and the Volkswagen Ameo, technically classified as sedans. The passage in these vehicles will remain unchanged.
And despite the hike, the big cars and SUVs will be even cheaper than what they cost before the GST.
The total tax rate of these vehicles before the GST was between 52-54.72%, to which was added 2.5% by the central tax on sales, subsidy, etc.
Against this, after the GST, the total tax incidence fell to 43%.
As a result, SUV prices for example dropped from Rs 1-3 lakh after the GST came out and some luxury cars saw as much as Rs 10 lakh shaved their tags after the launch of the GST.
It was this decline that led the GST Council to decide on August 5 that the ceiling should be amended.
The money raised by this government is used by the central government to compensate for any loss of income under the GST.
To this end, the government will ultimately have to amend the GST (Compensation for a State) Act. For the time being, it will do so by an order, which must be approved by the president.