Sports utility vehicles (SUVs) and top-end luxury cars are expected to cost more with states and the Centre seeking to increase the cess on these vehicles to correct a so-called “anomaly” that crept in when goods and services tax (GST) rates were decided.
Sources told TOI that the plan is to increase the cess from 15% to 25%. Currently, the levy on these vehicles, including the 28% GST, adds up to 43%, which will rise to 53% once the law is amended.
There are also plans to reduce rates on a number of aam aadmi products – ranging from custard powder and idli and dosa batter to idols and prayer beads.
UP has been leading the charge for lower levies on many products, said sources.
There are several other items on which the fitment committee, comprising officers, is reviewing the rates.
They are likely to be decided when the GST Council meets in Hyderabad next month. “Like cigarettes, an error crept in while deciding the rates for high-end cars,” said a source, adding that the change would require legislative amendments with the timing to be decided by the Centre.
However, a review of the rates on hybrid cars has been rejected.
Raising the levy on SUVs will also help the government counter protests over hybrid vehicles facing the same levy as more polluting ones.
A higher cess will leave the Centre with more resources in the compensation fund that will be tapped to make good possible losses incurred by states due to GST rollout. Small vehicles face 28% tax and a 1% cess, which will remain unchanged, along with the 3% cess on bikes with engine capacity of 350-500 cc.
On Saturday, TOI had reported that the GST Council was reviewing the levy on high-end vehicles. While the Centre had pushed for the 15% levy, several states led by Tamil Nadu have argued that the tax incidence on SUVs and high-end cars such as those from BMW, Audi and Mercedes has come down. The GST Council will discuss the issue and is likely to raise the compensation cess on luxury cars, through an amendment in the Act.