Skip to main content

GST cess: President promulgates ordinance to raise ceiling on large cars, SUVs to 25%

By
GST cess: President promulgates ordinance to raise ceiling on large cars, SUVs to 25%
President Ram Nath Kovind promulgates ordinance enabling increase in GST cess on medium-sized cars, large cars and sports utility vehicles (SUVs) from 15% to 25%

President Ram Nath Kovind has promulgated an ordinance enabling an increase in the goods and services tax (GST) cess on motor vehicles, including medium-sized cars, large cars and sports utility vehicles (SUVs), from 15% to 25%.

The GST (Compensation to States) Amendment Ordinance, 2017 has amended the law to raise the maximum cess that can be levied on cars to 25%. However, the increase in the rate from the 15% levied at present will be effective only after the federal indirect tax body, the GST Council, notifies it. Cess is levied on motor vehicles over and above a 28% GST.

The ordinance notified on Sunday in the official gazette said the change is applicable on all motor vehicles with a capacity of up to 13 persons as well as on all cars where the cess is 15% at present. That includes medium-sized to large cars, SUVs and hybrid cars. At present, cess levied on small petrol and diesel cars at the rate of 1% and 3%, respectively, remains unchanged.

The ordinance said the changes in the ceiling come into force at once.

“The Ordinance is on expected lines. Amendment to the law raising the ceiling of GST compensation cess from 15% to 25% comes into force immediately, but the actual increase may happen after a notification to that effect,” said Pratik Jain, partner and leader of indirect tax practice, PwC India.

The Union cabinet chaired by Prime Minister Narendra Modi had on 30 August approved the proposal for an Ordinance. The GST Council, which is expected to meet on 9 September in Hyderabad, is likely to decide on the quantum of increase to be implemented.

The government went ahead with the decision to raise the cess despite fears of unsettling businesses during the transition to the new indirect tax system as the tax burden on large and luxury cars had come down unexpectedly after the tax reform was implemented from 1 July. The idea is to correct this unintended consequence of the GST rate fixing.

Prices of most SUVs were cut by Rs1.1 lakh to Rs3.5 lakh after the GST rollout on 1 July. As a result, car market leader Maruti Suzuki India Ltd’s domestic sales rose 22.4% in July from a year ago. Sales at Mahindra and Mahindra Ltd and Toyota Kirloskar Motor Pvt. Ltd grew 21% and 43%, respectively, in July. The expected upward revision in cess will lead to an increase in the prices of bigger vehicles.

Mint, New Delhi, 05th September 2017

Comments

Post a Comment

Popular posts from this blog

Household debt up, but India still lags emerging-market economies: RBI

By
  Although household debt in India is rising, driven by increased borrowing from the financial sector, it remains lower than in other emerging-market economies (EMEs), the Reserve Bank of India (RBI) said in its Financial Stability Report. It added that non-housing retail loans, largely taken for consumption, accounted for 55 per cent of total household debt.As of December 2024, India’s household debt-to-gross domestic product ratio stood at 41.9 per cent. “...Non-housing retail loans, which are mostly used for consumption purposes, formed 54.9 per cent of total household debt as of March 2025 and 25.7 per cent of disposable income as of March 2024. Moreover, the share of these loans has been growing consistently over the years, and their growth has outpaced that of both housing loans and agriculture and business loans,” the RBI said in its report.Housing loans, by contrast, made up 29 per cent of household debt, and their growth has remained steady. However, disaggregated data sho...
Post a Comment
Read more

External spillovers likely to hit India's financial system: RBI report

By
  While India’s growth remains insulated from global headwinds mainly due to buoyant domestic demand, the domestic financial system could, however, be impacted by external spillovers, the Reserve Bank of India (RBI) said in its half yearly Financial Stability Report published on Monday.Furthermore, the rising global trade disputes and intensifying geopolitical hostilities could negatively impact the domestic growth outlook and reduce the demand for bank credit, which has decelerated sharply. “Moreover, it could also lead to increased risk aversion among investors and further corrections in domestic equity markets, which despite the recent correction, remain at the high end of their historical range,” the report said.It noted that there is some build-up of stress, primarily in financial markets, on account of global spillovers, which is reflected in the marginal rise in the financial system stress indicator, an indicator of the stress level in the financial system, compared to its p...
Post a Comment
Read more

Healthy balance sheets augur well for economy: RBI Governor Sanjay Malhotra

By
  Large tariffs by the United States administration and elevated geopolitical risk have increased near-term global financial stability risks, and along with weather events pose downside risks to domestic growth, Reserve Bank of India(RBI) Governor Sanjay Malhotra said in the foreword to the Financial Stability Report released today.Noting that domestic growth momentum is buoyed by strong domestic drivers, sound macroeconomic fundamentals and prudent policies, Malhotra said: “External spillovers and weather-related events could pose downside risks to growth.”On the other hand, he said the outlook for inflation is benign, and there is greater confidence in the durable alignment of inflation with the Reserve Bank’s target.Commenting that the structural shifts reshaping the global economy are making policy intervention challenging, the Governor emphasised the need for central banks and financial sector regulators to remain vigilant, prudent and agile in safeguarding their economies and...
Post a Comment
Read more