The Goods and Services Tax Council has decided to increase the effective tax (rate and cess) on certain categories of automobiles to ensure the tax burden on them is similar to that imposed prior to the implementation of GST.
In a media conference held after the GST Council met in Hyderabad on Saturday, Finance Minister Arun Jaitley said this was in an effort to maintain “equivalence”. He also pointed out that despite the increase in tax burden some relief has been allowed for consumers.
The changes announced are:
1200 cc petrol cars: Had 3 percent tax advantage. GST Council maintains status quo.
1500 cc diesel cars: Had 3 percent tax advantage: GST Council maintains status quo.
Post GST the rate had fallen from 48 percent to 43 percent: GST Council decided to raise overall GST rate to 45 percent.
Had 8 percent tax advantage: GST Council has increased cess by 5 percent.
Sports Utility Vehicles
Had 11 percent advantage: GST Council has increased cess by 7 percent.
Vehicles with 13 seats: Status quo maintained
Hybrids: Status quo maintained.
The auto industry will be relieved by the GST Council’s decision, Pratik Jain, partner and indirect tax leader at PwC India said in an emailed statement.
The quantum of increase in the compensation cess is less than what industry was fearing and small cars have been spared, so overall industry would be relieved.Pratik Jain, Partner and Indirect Tax Leader, PwC India
Maruti Suzuki Ltd. Chairman RC Bhargava said the company will remain unaffected by these changes announced by the GST Council. “There will be some hike in prices for medium-sized cars. The exact quantum of the hike is difficult to quantify,” he told BloombergQuint over the phone.
The government could have empowered themselves to hike the compensation by 10 percent across the board but they have been more considerate and have nuanced the increases depending on the size of the vehicles, President of Society of Indian Automobile Manufacturers, Abhay Firodia told BloombergQuint over the phone.
The increase in the effective rates of Compensation Cess on specified motor vehicles will be issued on September 11, and will be effective from midnight, according to a tweet by CBEC.