GST: Cess on luxury cars to rise to 25%
What's the story
The GST Council has decided to raise the cess on luxury automobiles from 15% to 25%. Reportedly, tax on luxury vehicles will rise to 53% once laws are amended, as compared to the current 43% which includes 28% GST. The decision to review rates comes after an 'anomaly' crept in while GST rates were being decided, which allowed producers to pocket unauthorized gains.
Information
Know about GST cess
GST cess is a compensation cess levied under Section 8 of GST (Compensation to State) Act, 2017. It is imposed on intra and inter-state supply of goods and services in order to compensate the states for loss of revenue incurred due to implementation of GST.
Review
Rates of several items to be reviewed
With the GST Council raising the cess on luxury vehicles, there are several other items for which the rates are being reviewed. Reportedly, UP has been charging minimum taxes on almost all the products. The revision in the rates will be decided by the GST Council at its meeting next month in Hyderabad. However, rates for hybrid cars would not be reviewed.
Conclusion
Cess on high-end vehicles under special consideration
With the GST Council prompting changes and revisions, the cess on small vehicles remains unchanged at 28% tax and a 1% cess, and a 3% cess on bikes with engine capacity of 350-500 cc. The GST Council and the states are reviewing the levy on high-end vehicles, as states like Tamil Nadu argued that tax incidence on luxury cars have already come down.