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Top end cars may cost more after government approves increase in GST cess

Mid and top end cars such as luxury vehicles, SUVs and hybrids may cost more since the government has approved the increase in GST cess. At present, the max cess allowable under GST is 15 percent. However, today the government has approved an ordinance, allowing the cess on GST to be raised up to a maximum of 25 percent. The move by the government is an attempt to correct the anomaly that had emerged after GST was launched on July 1. After the launch of GST, it was noticed that prices of luxury cars had come down and prices of certain everyday commodities used by common people had gone up. This was affecting the government’s image in the way that it was making things cheaper for the rich and increasing prices of goods used by the masses. With the new ordinance to raise the cess on GST up to a maximum of 25 percent, the government has effectively resolved that anomaly.

It may be recalled that the decision to raise cess on GST was being protested by car manufacturers since they had already announced discounts on various models. Certain car manufacturers had said that such frequent policy changes will impact their business plans. However, the government has still gone ahead and made the changes to the cess on GST. Since the Parliament is not in session at present, the ordinance will be sent to the President for promulgation. However, the ordinance will need to be approved in the Parliament within six months. Speaking about the ordinance, Finance Minister Arun Jaitley said, “If at all relief is to be given, it has to be given to a common man’s item rather than a luxury item. So a person who can afford Rs 1 crore for a vehicle can also afford Rs 1.20 crore.”

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