GST cess on SUVs, luxury cars to be hiked by 10%

The Ministry of Finance has proposed to revise the current GST cess on SUVs and luxury cars from 15 per cent to 25 per cent. 

The Goods and Services Tax (GST) may have been in place for well over a month now, but the government is already planning to revise the tax-structure on certain products. And as we’ve come to witness in the past, it’s the automobile industry that’s going to bear the brunt of it. The government is planning to increase the cess on mid-size/luxury cars/SUVs from current 15 per cent to 25 per cent, meaning it’ll effectively be the same as it was before GST implementation. So, all the price cuts that you’ve seen on SUVs and luxury cars lately, they’re all going to be nullified soon!

As per the Ministry of Finance, the GST Council has noticed an “anomaly” in the new tax structure and has proposed to revise the cess rates for cars bigger than 4 meters and exceeding the engine capacity of 1,500cc. As to when the new tax structure will come into effect, it’ll be decided by the GST Council meeting that happens in September 2017. The tax structure on smaller cars is expected to remain unchanged though.

It’s inevitable that car manufacturers are not going to take the revised tax structure kindly. In fact, some of the industry heavyweights have already started reacting strongly against the increase in cess on bigger vehicles. Commenting on the reports of the new tax structure, Roland Folger, Managing Director and CEO, Mercedes-Benz India, said: "We are highly disappointed with the decision. We believe this will be a strong deterrent to the growth of luxury cars in this country. This decision will also reverse the positive momentum that the industry wanted to achieve with the introduction of GST. With this hike in cess, we expect the volumes of the luxury industry to decelerate."

Vikram Pawah, President, BMW Group India echoed similar sentiments and said, "While BMW Group India welcomes the implementation of the GST in India, immediate changes and fluctuations on motor vehicles cess will adversely affect the stability and growth of the automotive industry in India."

Once the tax structure is revised and implemented, SUVs, luxury cars and even mid-size premium sedans will get dearer by 10 per cent. So, if you are planning to buy a new luxury car or SUV currently, it’s best to go out and get the deal done right now!