The goods and services tax popularly known as GST, was launched across India on the midnight of June 30th in a grand midnight ceremony. A lot of time has passed since its launch and the country is gradually settling down into the GST era.
There has been much talk on the impact of GST on the automobile industry. You and other citizens love SUVs. Today, one in every 4 cars sold in India is an SUV. If you are planning to buy an SUV, midsize car or a luxury sedan there's bad news for you. The GST Council has decided to raise the cess on high end automobiles.
GST was a boon to the automobile industry. Many car models had become cheaper after GST. You and a number of citizens were simply waiting to buy your dream car. But now, things could be different. With the GST Council deciding to raise the cess on high end automobiles, will the prices of midsize cars and luxury sedans go up? Let's take a look.
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Before GST was introduced in India, the effective tax on mid-sized sedans was around 47% and around 31% on Hybrid vehicles. The effective tax on SUVs was around 55%. After GST you and other buyers of luxury cars and SUVs had reason to jump with joy.
SUVs, luxury and large cars fall in the 28% GST slab. Then there is an additional 15% cess. The total GST falls to 43%. This is a much lower tax rate on luxury cars than before GST.
See also: GST advantages and disadvantages
After GST the total tax on luxury cars, SUVs and hybrid cars was 43%. Now, the GST council has decided to raise the cess from 15% to 25%. This would take the total tax under GST on luxury cars and SUVs to 53%.
Many luxury carmakers are protesting against this move, saying they had reduced car prices to pass on the benefits of lower taxes under GST to you and other buyers. A cess hike would make luxury cars more costly.
See Also: GST Tax Rates In India
Will luxury cars become expensive after the cess hike?
You must be really worried. It's time to buy your dream SUV and the GST Council wants to raise the cess. Relax....There's no need to get worried. The Government will most probably not allow the tax under GST on midsized cars, large cars and SUVs to cross the 50% mark. This means a cess of less than 25%.
There's more... The GST Council is still deciding on the quantum of increase. Even if tax rate is hiked, it won't be imposed at one go. This news will definitely please luxury carmakers who were enjoying bumper sales after GST. So the party could well, continue.
Relax, you can still buy your dream SUV or luxury car after GST.
Wondering why the GST Council has decided to hike cess rates from 15% to 25%? The Government had levied the 15% cess on luxury cars and SUVs to compensate states for any loss in revenue because of GST. An increase in cess from 15% to 25% will help in further compensating these losses. Be Wise, Get Rich.
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