[TusharK]

Union cabinet has approved a hike in GST cess on mid-size sedans, SUVs and luxury cars. GST cess on the aforementioned vehicles will be increased from the current 15% to 25%.



The GST Council met on August 5, 2017 to review tax rates that were rolled out on July 1, 2017 as part of the new GST regime. The council had approved a hike in cess to 25% on large sedans and SUVs. Now that the government of India has given its nod for the hike, the process for the required amendment to the GST Act, 2017 can begin. The GST Council is said to announce the date when the revised cess will be applicable once the law is amended.

The decision comes in the wake of the GST Council's recommendations for a hike in cess after prices of most vehicles saw a steep drop following the implementation of GST. Certain vehicles saw a price cut of around Rs. 1-3 lakh. It's worth noting that the highest pre-GST tax incidence on cars was around 52-54.7% excluding other taxes like central sales tax, octroi, etc. In comparison, this dropped to 43% post-GST (28% GST + 15% cess). With the current increase in cess to 25%, the highest tax incidence is now closer to the pre-GST percentage.

Under current provisions of GST, large SUVs, luxury cars and hybrid vehicles attract a cess of 15%, while sub-4 meter, 1200cc cars and sub-4 meter, 1500cc diesel cars attract a cess of 1% and 3% respectively in addition to the 28% GST.

Source: ET Auto

[a4anurag]

Quoting another relevant bit from the same source as above

Once the law is amended, the GST Council will decide on the date when the increased cess will be applicable, the official said, adding the next meeting of the panel is scheduled to be held in Hyderabad on September 9.

[volkman10]

Here is the press release,



press

Here is likely to be the approx. impact,



Link

[venom_op]

This is just great! Still waiting for Achhe Din..

[Arjun Reddy]

So the above table just calculates 10% on the current ex-showroom price. Shouldn't the 10% actually be calculated on the ex- factory price? So there will be a minor variation on the prices shown on the table.

[Reinhard]

Funny isn't it? I'm a law abiding, tax paying salaried employee with minimal knowledge of economics. This is how it seems to me -

1. Drum all over the world about GST being good for everyone - especially us consumers, who are actually going to PAY IT.
2. Apparently spend decades across multiple governments to decide on the slabs.
3. Put cars in a particular slab
4. Get surprised upon learning that the tax payer is actually SAVING some money and unexpectedly getting things cheaper than before.
5. My god how did we do that?!?!?! A Happy tax payer??
6. Find ways to add OVER and ABOVE the GST in the form of "CESS" to make more money at the expense of the tax payer.
7. Who cares about the advertisements that it will be one for all & simple to apply based on the slabs. Nothing complicated. Maybe CESS simplifies the calculations somewhere unknown to me.
8. Formally open up the doors for all authorities from gram-panchayat upwards to add their own taxes / levies / CESS over and above the "single tax" by doing it yourself.

Not that I could afford to buy a car from these segments without the CESS either but I find it really very naive to say the least. Obviously enough study wasn't done when rolling out such a supposedly ground-breaking reform.

Not to mention the negative impact it will have on sales - potential lower sales eventually percolating to less work at the factory, less salaried employees and less income tax collection.

The idea of high earners paying higher taxes everywhere is OK but well...Like I said, I'm not an economist.

[Turbanator]

So the above table just calculates 10% on the current ex-showroom price. Shouldn't the 10% actually be calculated on the ex- factory price?

That should be wrong, actual increase will be 7% on the current prices unless Manufacturers become greedy and change basic rates and try to pass as net 10 % increase. Normally during this period, BMW, Toyota increases prices every Year.

For example, Current Basic price before GST - 100, current GST - 43 % so Present Ex-Showroom = Rs 143, after change in GST, it will be 100 + 53 % = Rs 153 so increase will be 7 %

Get surprised upon learning that the tax payer is actually SAVING some money and unexpectedly getting things cheaper than before.

I can understand your pain, after paying 35 % and higher Income tax normal salaried class will have to cough up 53 % GST and an average 10 % road tax. Of course, for corporates, it won't matter much.

[pgsagar]

Originally Posted by Reinhard

Funny isn't it? I'm a law abiding, tax paying salaried employee with minimal knowledge of economics. This is how it seems to me

Well said. Any citizen expecting any relief from Govt., central or state, lives in a fool's paradise. All the tall talk about GST was hogwash. We will continue to be taxed to death by govts. The minute they find out that post-GST net tax component on some item has come down, they will step in with some cess to take it up and past what was the before tax component.

[Reinhard]

Originally Posted by pgsagar

Well said. Any citizen expecting any relief from Govt., central or state, lives in a fool's paradise. All the tall talk about GST was hogwash. We will continue to be taxed to death by govts. The minute they find out that post-GST net tax component on some item has come down, they will step in with some cess to take it up and past what was the before tax component.

Whats more frustrating is the way it was handled! Okay you learnt that some net tax was lesser & want to change it.

The scramble afterwards? Very rarely do we see a scramble to fix broken roads, dangerously designed bridges. But this time it was SWIFT (pun not intended!).

Could have done it still better rather than this hasty approach. Makes it look especially painful for the tax payers this way.

[octane_100]

With out meaning offense to anybody, one should realize that GST was never about reducing the indirect tax rates. It is about merging all the different forms of taxes and making a single tax and also to ensure that for a given product the tax rate is uniform across the country.


I do agree that the temporary reduction and then the sudden roll back leaves a bitter taste. But trust me, as an entrepreneur I am breathing a little easier today as harassment shall be from only one department going forward ��

[sri_tesla]

Originally Posted by volkman10

Here is likely to be the approx. impact,

Attachment 1671023

This chart seems to be very wrong. I don't remember Honda or Maruti reducing the ex-showroom prices of S-cross or City models post GST.

Isn't govt just bringing the additional cess to match the Pre-GST total taxes? If anything these companies seems to have pocketed the reduced amount in GST taxes. But some companies (Toyota, Ford, Audi, Mercedes, BMW, etc...) reduced their high end car prices.

[sandeepmdas]

Originally Posted by Reinhard

Whats more frustrating is the way it was handled! Okay you learnt that some net tax was lesser & want to change it.

The scramble afterwards? Very rarely do we see a scramble to fix broken roads, dangerously designed bridges. But this time it was SWIFT (pun not intended!).

Could have done it still better rather than this hasty approach. Makes it look especially painful for the tax payers this way.

This is what happens when we have the first-ever Trial & Error Finance Minster in the office. "Oops! Guys, guys, I made a mistake, a mistake. Lemme correct it here's an ordinance..."

It clearly shows the GST implementation neither has sense or direction. I could be *slightly* wrong, but the fact that they implemented a flat 28% GST on paint, water color, crayons, highlighter pens etc. (everything that can be used to colorize ) itself speaks volumes about the GST council's mindset. Paint - that saves at least a trillion rupees worth of investment and infrastructure in a decade is now considered as a luxury item. .

Modi made a big mistake by allotting this portfolio to a man who actually lost his election in 2014.

[anjan_c2007]

It was bound to happen. Since our socialist leanings in black and white from the 1950's till the late 1980's cars, tobacco products like cigarettes (not bidis because bidis are presumably "good" for health) and alcoholic drinks mainly Indian made foreign liquor (IMFL) ( and again desi liquor was not touched because it is presumably also "good" for health) would be burdened with tax hikes in almost every Union and State budgets.

Today the scenario is the same even after opening up of our economy in 1991, ushering in liberalisation, globalisation and freeing the Indian Rupee. The Rupee was freed from all shackles to allow it to get its real exchange value in the international market against other major currencies.

The GST rates were for sure mistakenly assigned at lower slabs for the larger cars and SUV's. And the socialist thinking still shows when the costlier and larger cars and SUV's get bracketed again in higher GST tax slabs. Its just that they want to send message to the common man that we are taxing the rich. What rich ! Today many salaried employees go for C segment cars and cheaper SUV's. The revenue kitty will be richer by maybe some more hundreds of crores of rupees, which is not of much significance, ,but the message being sent to the common man that we tax and axe the rich, is.

The hare-brained policy makers do not realise that this sends very wrong signals to both Indian and foreign car makers, who are investing and deciding their road map for a very long term, based on such taxes and govt policies. It affects the business climate badly and the faith in the executive and legislature is totally lost due to such pogo game like, vacillating decisions.

Another fact is that medical aids and equipment used by the handicapped were taxed at 18 % ( an unrealistic high slab) in the first instance that raised a big hue and cry. During the last GST Council meeting the issue has been resolved hopefully.

[volkman10]

Union Cabinet has approved an ordinance that raises GST cess on luxury cars and SUVs to 25% from 15%, taking the total GST on such cars to 53% .

The ordinance is expected to precede a 9 September meeting in Hyderabad of the GST Council, the federal body that decides on all indirect tax matters. At the meeting, the council may decide where to finally fix the cess, which is now at 15%.

It does not mean that the cess will automatically go up from 15% to 25%. It (the Ordinance) only is an enabling measure. The GST Council, is entitled to take a decision on whether it needs to increase the cess within the cap

the upper limit of cess that can be imposed by the government on motor vehicles with a capacity to carry 13 people, vehicles with 10-13 people capacity, mid-segment cars with engine capacity less than 1500cc and large segment cars with higher engine capacity, SUVs and hybrid vehicles, will go up to 25% once the ordinance is promulgated. The upper ceiling on small petrol and diesel cars less than 4 metres long, which currently attract cess of 1% and 3% respectively, remain unchanged. Motor vehicles attract a GST of 28% besides the applicable cess.

link

[timuseravan]

Originally Posted by octane_100

With out meaning offense to anybody, one should realize that GST was never about reducing the indirect tax rates. It is about merging all the different forms of taxes and making a single tax and also to ensure that for a given product the tax rate is uniform across the country.

Exactly this.
The point was not to reduce the taxes but to reduce the administrative overhead.
As with almost all govt initiative, it could have been implement better. Rather than adding cess and having the stupid 4m, people, ground clearance rules, they should have gone for maybe price based rate.