The GST Council has asked the Centre to raise the cess cap on these vehicles to 25 per cent from the current 15 per cent, an official statement said. Yes you heard it right GST will increase on luxury cars by 25 percent from 15 percent current charges. The decision was taken at the Council’s meeting on August 5,2017, though the Centre has been advised to increase the ceiling on cess, the decision on when to bring it into effect is still pending. Mercedes-Benz India,the luxury car maker has voiced its disappointment at the Government’s latest decision. “We are highly disappointed with the decision. We believe this will be a strong deterrent to the growth of luxury cars in this country,” Roland Folger, MD and CEO, Mercedes-Benz India, was quoted as saying in a statement issued by the company.
After the cap on cess is raised, the total tax under the Goods and Services Tax (GST) on such motor vehicles may go up to 53 per cent from the current 43 per cent as these have been placed under the highest tax slab of 28 per cent.
“The GST Council considered the issue of cess leviable on motor vehicles in its 20th meeting held on August 5 and recommended that central government may move legislative amendments required for increase in the maximum ceiling of cess leviable on motor vehicles falling under headings 8702 and 8703, including SUVs, to 25 per cent instead of present 15 per cent,” said a Finance Ministry statement on Monday.
The Schedule to the GST (Compensation to State) Act, 2017, currently specifies 15 per cent as the maximum cess rate for motor vehicles. “However, the decision on when to raise the actual cess leviable on the same would be taken by the GST Council in due course,” it said. The government said that the decision was taken because it was noticed that after the roll-out of the GST, the total tax incidence on motor vehicles had come down as compared to pre-GST regime.
According to Folger, the government’s decision will reverse the positive momentum that the industry wanted to achieve with the introduction of the GST.”As a leading luxury car maker, this will also affect our future plans of expansion under ‘Make in India’ initiative, which aims at making and selling world-class products in India, with the latest technology for end-consumers,” he added.He also called for the need for a long-term road-map for the luxury car industry in India.
Let’s see how these changes are embraced as this policy will change the game of luxury car market. Market is highly at risk with the constant shift in policy says the luxury car makers. It would have an adverse impact on the country’s financial ratings.