The Union Cabinet has approved the government appointed GST Council's ordinance proposal to raise the ceiling for the cess applicable (15 percent) on top of the GST slab (28 percent) on luxury cars.  

This ordinance clearance implies that the currently levied cess of 15 percent on luxury cars and SUVs is set to move to 25 percent, taking the cess cap on these vehicles higher. This would take the total tax on these vehicles to move from the currently standing 43 percent to 53 percent. 

The trigger for this revision was the fact that SUVs and luxury sedans had been the biggest beneficiaries in the new GST regime, seeing a substantial 12 percent reduction in taxes from the 55 percent net tax applicable in the pre-GST economic structure of the country.  

A little over a month into the new tax system, the GST Council in its meeting on August 5, came up with its recommendations, to hike the cess on these vehicle categories. 

While the ordinance has been cleared, it is the next sitting of this panel, slated for September 9, which would finalise the implementation date of the revised cess. Unfortunately, with no distinct demarcation in place, the revision is also set to encompass all cars, which are above 4-metre in length and boast an engine capacity higher than 1,500cc in diesel or 1,200cc in petrol, thus clubbing all of them into the single category of luxury cars. 

With most carmakers having strongly discouraged this idea, also sending in their suggestion to the Council through the unified body SIAM, the almost sealed increment could adversely impact sales during the festive season, which has just started.  

GST driven price cuts had brought in significant sales in July, with UV numbers rising significantly by 35.52 percent (86,874 units), and the cumulative PV numbers also touching their best-ever 298,997 units (+15.12%). 

Also read:

Revised GST cess means SUV-ival of the fittest in India 

New GST cess to hit luxury car sales in India 

Revised GST cess will hit luxury market growth in 2017: Mercedes-Benz India