Are you planning to get yourself a new luxury car this Puja season? We would like to inform you that the GST Council on September 9 decided to hike cess on mid-sized cars by 2 per cent, taking the effective GST rate to 45 per cent.
Also, cess on large cars has been hiked by 5 per cent, taking the total GST incidence to 48 per cent while that of SUVs by 7 per cent to 50 per cent.
"Notification regarding the increase in the effective rates of the Compensation Cess on specified motor vehicles will be issued on September 11, 2017, effective from 00 hours the same day," the Central Board of Excise and Customs (CBEC) tweeted.
After the GST Council met, Finance Minister Arun Jaitley had said that in large vehicles where affordability of consumers is high, the cess has been increased. "The pre-GST rate has not been restored... Even though we had a headspace of hiking cess by 10 per cent, it has been hiked by up to 7 per cent," Jaitley had said.
Cess on small petrol and diesel cars, hybrid cars and those carrying up to 13 passengers has not been hiked. Car prices had dropped by up to Rs 3 lakh as the tax rates fixed under the Goods and Services Tax (GST), which came into effect on July 1, were lower than the combined central and state taxes in pre-GST days.
-Honda City and Hyundai Verna to cost about Rs 20,000. Mid-market SUVs such as the Creta and Duster's price will see hike as much as Rs 90,000. The increases are expected to be higher in the C and D segments. However, the total tax incidence on vehicles in the mid-sized, large and SUV categories will be lower by 1.6%, 3.8% and 5.3%, respectively, compared to pre-GST levies.
-The Jeep Compass, Mahindra XUV, Tata Hexa and Toyota Innova will likely be costlier by as much as Rs 1.2 lakh.
-Bigger SUVs such as the Toyota Fortuner, Ford Endeavour, Audi Q3 and BMW X1 will be pricier by up to Rs 2 lakh while Luxury SUVs such as the Audi Q7 may cost up to Rs 4 lakh more.
“As far as Maruti Suzuki is concerned, there is no change. And a two percentage point increase in cess on midsized cars is neither here nor there, and would not make a difference… The market was absorbing the same prices two months ago,” Maruti Suzuki chairman RC Bhargava said.
The cess was proposed to be raised by a maximum of 10 percentage points. Hyundai ruled out any adverse impact on demand.
“We foresee no major change in demand,” said Rakesh Srivastava, director (marketing and sales), Hyundai Motor India Limited (HMIL).
“We expect a positive demand pull in the coming months as the industry will witness a heightened level of customer interest in a seamless, unified single market.”
Pawan Goenka, MD of Mahindra & Mahindra, said his company is grateful that the council “thoughtfully” did not raise the cess to the maximum level that had been enabled by the ordinance.
“The council has basically restored the pre-GST rates. The hybrid vehicle cess has not been increased, effectively giving these vehicles a relief of 2-7%,” added Goenka.
Several leading mass-market carmakers had concerns of demand contraction after a 10% increase in the cess was initially proposed.
“The auto industry would be largely happy as the GST Council only marginally increased the cess. The increase was also less than 10 percentage points, which was the upper cap.
To fix this anomaly, the Council raised the cess. Under the GST regime, cars attract the highest tax slab of 28 per cent and on top of that, a cess is levied.
An ordinance was promulgated last week to hike the cess from 15 per cent to up to 25 per cent.
The Council on Sunday decided on the quantum of hike in cess in various segments. 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 and the like. Against this, post-GST, the total tax incidence came to 43 per cent. With the revision in cess quantum, now the anomalies have been removed to a greater extent.
With PTI Inputs