Luxury Cars Liable for 28 percent Tax under GST

Recently, the GST council agreed upon a four-tier GST tax design of 5, 12, 18 and 28 percent, keeping essential items at lower rates and higher rates for luxury items including cars. The luxury cars will fall under the peak tax rate i.e 28 percent. Presently, the tax rate for luxury goods is kept at 30 percent (including VAT and excise duty).

According to a Mercedes Benz India spokesperson,"We are currently seeking more clarity on the impact of the GST rate on the prices of luxury vehicles. Our internal team is in the process of assessing the same. The basis of classification of luxury cars is also not known as of yet. We are seeking further clarity on that as well."

Also, the government still needs to categorise the luxury car segment as the additional cess will be collected in order to compensate the states against any loss of revenue for five years under the GST regime.

The imposition of excise duty on Indian cars depends on the engine capacity and dimension of the cars. 12.5 percent of excise duty is reserved for small cars. The government has also introduced infra cess on the cars in the budget session in the range 1-4 percent, which will lead to the price hike of the cars.

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The Society of Indian Automobile Manufacturers (SIAM) had also recommended a standard common tax rate for small cars and additional 8 percent tax on other big cars. SIAM also suggested that the EVs and hybrid cars must be kept 8 percent lesser than the standard tax rate.

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