GST Council meet: Big cars to cost more

New Delhi: The GST Council, under the supervision of Arun Jaitley has announced that there would be no modification in tax for small cars. “There will be no additional burden on those buying small cars. There will be a status quo on tax rates on 1,200 cc petrol and 1,500 cc diesel cars,” he said.

On the other side of the coin, for those interested in buying a bigger car, it is not as pleasant. The 21st Council meet, and the second since the implementation of GST, put its stamp on a long pending issue by raising total tax on mid-size cars from 43 per cent to 45 per cent.

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While the mid-segment may cost less, there is a strong possibility that big car segment has seen a dip in tax from 43 per cent to 48 per cent. Furthermore, the SUV segment too has been nudged to a higher tax bracket. The total tax on SUVs would now be 50 per cent instead of the previous 43 per cent. The tax on passenger carrier vehicles and larger vehicles has been left untouched.

The auto, in its representations to the government, had sought a differential hike formula which consists of low increase for mid-sized cars. The argument was that a hike in the segment would hit the middle class which is currently the driving force in the auto market.

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Because of the increase in cess rate, the overall tax incidence on various cars is as follows:

  • Small cars, hybrid cars and 13-seater vehicles: No change
  • Large cars: Tax up by 5 per cent
  • SUVs: Tax up by 7 per cent
  • Mid-size cars: Tax up by 2 per cent

Total tax incidence on different segments:

  • Mid-size cars: 45 per cent
  • Large cars: 48 per cent
  • SUVs: 50 per cent

 

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With the amended rules even if a brand is deregistered after May 15, 2017 cut-off date it will be considered as a registered brand for the purpose of GST levy.

“Overall GST collections have been robust with over 70 per cent of eligible taxpayers filing returns of about Rs 95,000 crore,” Jaitley said.