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 pre-GST regime.
The Centre will amend the GST Act, 2017 to hike the compensation cess on SUVs, mid-sized, large and luxury cars after the Goods and Services Tax (GST) Council proposed to increase it to 25 per cent from the current rate of 15 per cent.
Luxury cars have become cheaper after GST rollout on July 1, but they will now cost more. Under the new GST regime, cars attract 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.
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 pre-GST regime, according to the finance ministry.
On August 5, the council has 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 decision on when to raise the actual cess leviable on the same will be taken by the GST Council in due course, it added.
The increase in compensation cess will require amendment to the Schedule to section 8 of the GST (Compensation to a State) Act, 2017.
On July 25 meeting, the GST Fitment Committee felt that the total tax incidence in GST seems to have come down vis-a-vis pre-GST total tax figure.