The government has notified levy of increased GST cess of up to 7 percent on mid-size, large and SUV cars. The GST Council on September 9 had decided to hike cess on mid-size cars by 2 percent, on large cars by 5 percent and on SUVs by 7 percent to bring tax rates on these cars at pre-GST levels.
The effective GST rate on mid-size cars will be 45 percent, and on large cars, it would be 48 percent. The rate will be 50 percent on sports utility vehicles (SUVs), which include cars with length exceeding 4,000mm and having a ground clearance of 170mm and above. Car prices had dropped by up to Rs 3 lakh as the tax rates fixed under the Goods and Services Tax (GST) that came into effect from July 1, was lower than the combined central and state taxes in the preGST days.
To fix this anomaly, the council raised the cess. The Finance Ministry now has amended the notification ‘Compensation Cess (Rate)’, dated June 28, 2017, and brought in the changes in the rate of cess to be levied. However, cess on small petrol and diesel cars, hybrid cars and those carrying up to 13 passengers have not been raised. Under the GST regime, cars attract the highest tax slab of 28 percent and on top of that a cess is levied.
An ordinance was promulgated last week to hike the cess from 15 percent to up to 25 percent. The Council then on September 9 decided on the quantum of hike in cess in various segments. After the GST council meet, 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 percent, it has been hiked by up to 7 percent,” Jaitley had said.
The highest pre-GST tax incidence on motor vehicles worked out to about 52-54.72 percent, to which 2.5 percent was added on account of Central Sales Tax, octroi etc. Against this, post-GST the total tax incidence came to 43 per cent. With the revision in cess quantum with yesterday’s notification, now the anomalies have been removed to a greater extent. With this, small petrol cars with engine capacity less than 1200cc will attract only 1 per cent cess, while diesel cars with engine capacity of less than 1500cc will attract 3 per cent cess, on top of the 28 per cent GST rate.
Cess on hybrid cars, including mid, large and SUVs, have been retained at 15 percent, likewise those vehicles used for transport of not more than 13 passengers. Automakers such as Mahindra and Mahindra, Toyota Kirloskar Motor, Audi, Mercedes-Benz and JLR India have already said that they are planning to pass on the increased cess to consumers in form of hike in car prices.
Under the GST regime, cars attract the highest tax slab of 28 percent and on top of that, a cess is levied. The highest pre-GST tax incidence on motor vehicles worked out to about 52-54.72 percent, to which 2.5 percent was added on account of central sales Tax, octroi and the like. Against this, post-GST, the total tax incidence came to 43 percent. With the revision in cess quantum, now the anomalies have been removed to a greater extent.
CHEAPER PRODUCTS
As many as 40 products, including daily use ones like idli and dosa batter, raincoat, brooms and corduroy fabric, will cost less as the GST Council has lowered taxes on them. The Goods and Services Tax (GST) Council, at its 21st meeting in Hyderabad, also decided to reduce levy on computer monitors of up to 20 inches, cotton quilts, rubber bands and kitchen gas lighters. As per the list of items uploaded on the website of the Central Board of Excise and Customs (CBEC), khadi fabric sold through KVIC shops have been exempted from GST, which was implemented from July 1. Also, rate on saree fall, dhoop batti, corduroy fabric, walnut, dried tamarind and roasted gram has been brought down to 5 percent, from 12 percent earlier.
The rate revision in these 40 items followed after the fitment committee noticed anomalies in GST levied on these products. Accordingly, plastic raincoats and rubber bands have been fitted in the slab of 18 percent and 12 percent, respectively, as against the earlier 28 percent. Idli and dosa batter will attract 12 per cent GST, against 18 percent before, while brooms and brushes have been totally exempted from the levy. Kitchen gas lighters will attract 18 percent compared to 28 percent GST earlier while prayer beads will fall in the 5 percent slab against 18 percent previously. As against 28 percent, computer monitors with size of up to 20 inches will attract 18 per cent– thus bringing it on par with those whose screen size is up to 17 inches.
Cotton quilts costing up to Rs 1,000 will attract 5 percent while those above that will face 12 per cent GST, against the earlier uniform rate of 18 percent. Tableware, kitchenware, other household items and toilet articles of porcelain or china or those other than porcelain or china clay will be levied 12 per cent against 18 percent and 28 percent, respectively. All goods, including bells, gongs and the like, non-electric, of base metal; statuettes and other ornaments of base metal will attract 12 per cent GST compared to 18 percent earlier.
