If you are planning to buy a high-end car with your Diwali or new year Bonus, chances are more that you will have to shell out an extra 10%. The governments, including the central government and state governments, have been discussing the move to increase the cess levied on high-end cars. Currently, these cars are put under 28% GST bracket and along with that, an additional 15% cess is levied, making the total tax at 43%.
If the latest discussions of the government reach a conclusion, the cess might be revised to 25% from the existing 15% and if that happens, the effective tax rate on such cars will be 53%. Changes in the tax rate, however, will be implemented after a legislation bill is passed. The central government needs to come with a plan and date for the same.
According to sources, there were differences among the GST council members on the tax rate of high-end cars. As in the case of cigarettes, the members wanted maximum tax rate on high-end cars too.
There is also news that the GST Council has rejected the demand of revising the tax for hybrid cars.
The revision in the tax rate will provide a chance to the centre to compensate for the losses incurred by the state governments after GST rollout. Small cars will continue to fall in the pre-decided tax bracket. Small cars currently face 1% cess on top of 28% GST. Bikes with engine capacity of 350-500 cc also face 28% GST and 3% cess on top.
After the GST rollout, effective tax rate on cars from manufacturers such as BMW and Audi have come down. States like Tamil Nadu have been in support of increasing cess on such products to compensate for the fund losses they have faced since July 1st, the day GST was implemented.