Large cars, SUVs to be expensive as Cabinet clears GST cess hike ordinance

The Union Cabinet on Wednesday approved the promulgation of an ordinance to increase the cess on mid-size, large cars and SUVs from the current 15% to 25% under the new GST (Compensation to State) Act, 2017.

Finance Minister Arun Jaitley said the Goods and Services Tax (GST) council, with regard to two categories (of vehicles), is entitled to decide whether it wants to increase quantum of cap from 15% to 25%. The proposal before the Cabinet was to hike the cess rate on these cars to 25%.

The approval would allow increasing the maximum rate at which the Compensation Cess can be levied. The GST Council had on August 5 approved raising cess on SUVs, mid-size, large and luxury cars that had become cheaper post GST rollout on July 1. But raising the cess requires an amendment to the Schedule of Section 8 of the GST (Compensation to a State) Act, 2017.

"The proposal of imposition of higher cess has been cleared," a source said after the Cabinet meeting. The GST Council, the apex tax rate setting body under the GST regime, may in its next meeting on September 9 decide on the date when the increased cess will be applicable.

Other Cabinet decisions:

• Two commemorative postage stamps to be issued on the theme Diwali, jointly by India and Canada
• Union Cabinet approves MoU on India-Israel Industrial R&D and Technological Innovation Fund
• Union Cabinet approves India-Brazil MoU for cooperation in Zebu Cattle Genomics and Assisted Reproductive Technologies
• Cabinet approves MoU between India and Myanmar for conservation of earthquake-damaged pagodas at Bagan, Myanmar