In yet another unexpected move, the Lok Sabha has approved a bill to hike Cess on luxury vehicles from 15 per cent to 25 per cent. The Cess will be applicable along with the 28 per cent GST that is already applicable on cars that are over the 4-metre length category. In a statement, the Finance Minister Arun Jaitley said that the Cess on luxury cars has been increased in order to compensate states for revenue loss on account of implementation of the Goods and Services Tax or GST. This bill will now officially replace the ordinance, which was issued in September by the GST council that increased the GST on cars over the 4-metre length bracket.

While the original ordinance that was issued by the council had multiple brackets, which resulted in Cess increasing 15 per cent to 17 or 20 per cent for cars and to 22 per cent for SUVs, the new GST Cess rates will now be even higher at 25 per cent! These new Cess rates will most certainly mean a higher price point for all cars in the coming weeks in addition to the price hikes that have already been announced by most auto makers in India. That said, it is unclear if the new bill removes the sub bifurcation of Cess according to body style that was originally announced in September by the GST council and replace it will a flat 25 per cent Cess rate.

The new increase in Cess to 25 per cent though will certainly affect the Indian luxury car market that has already seen a trying year in terms of overall sales. The introduction of GST has been appreciated by most auto makers but the constant change in Cess structures and the singling out of the Indian automotive industry for the highest Cess brackets will also affect future investments from automakers.

Source: NDTV

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