The Union Cabinet chaired by
Prime Minister Narendra Modi cleared an ordinance to increase the cess on
mid-size, large cars, luxury cars and SUVs from current 15% to 25% under the
new GST regime. The cabinet gave its approval to the proposal of the Finance
Ministry to promulgate an ordinance to suitably amend the Goods and Services
Tax (Compensation to States) Act, 2017.
The approval would allow increasing the
maximum rate at which the Compensation Cess can be levied from 15% to 25% on:
a) motor vehicles for
transport of not more than thirteen persons, including the driver [falling
under sub-headings 870210, 8702 20, 8702 30 or 8702 90]; and
b) motor vehicles falling
under headings 8703.
Reacting to this government
move, Pawan Goenka, Managing Director, Mahindra & Mahindra Ltd, said the “Passing
of ordinance to increase the limit of cess to 25%, on certain class of
vehicles, is along the expected lines.
What is critical to the industry is when, how much and on what criteria
will the cess be increased. Industry has
made a representation to the Government and we await the final decision.”
Rohit Suri, President and
Managing Director, Jaguar Land Rover India Ltd noted that the “The GST
implementation on 1st July removed the cascading impact of multiple taxes
applicable in the pre-GST regime, which we understand was one of the primary
objectives of the Government. The removal of the cascading impact enabled the
Industry to reduce prices and benefit the consumer as well as expand the
market, which had been declining because of high taxation. The expansion in
demand would have enabled further investments in local manufacturing and job
creation across the supply chain including more people in factories, showrooms,
workshops and logistics service providers. We earnestly hope that the
Government and the GST Council will give due consideration to this matter and
desist from raising the cess and putting a dampener on the positive momentum in
demand that the industry had started to witness since 1st July.”