SUVs may cost more as GST Council approves raising cap on cess

New Delhi: Sports utility vehicles (SUVs), racing cars, station wagons and 10-seater cars, which includes some high-end cars and also cars used for rentals, may soon become more expensive as the GST Council has asked the government to raise the cess cap to 25 percent from the current 15 percent, an official statement said.

After the cap on cess is raised, the total tax under Goods and Services Tax (GST) on such motor vehicles may go up to 53 percent from the current 43 percent as these have been placed under the highest tax slab of 28 percent.

The decision was taken at the Council`s meeting on August 5. Though the Centre has been advised to increase the ceiling on cess, the decision on when to bring it into effect is still pending.

"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 the maximum ceiling of cess leviable on motor vehicles falling under headings 8702 and 8703 including SUVs, to 25 percent instead of present 15 percent," said a Finance Ministry statement on Monday.

The Schedule to the Goods and Service Tax (GST) (Compensation to State) Act 2017, currently specifies 15 percent 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 GST, the total tax incidence on motor vehicles had come down as compared to pre-GST regime.