GST cess on luxury cars and SUV’s is to increase from 15%. A proposal presented before the cabinet urged for cess hike on premium cars up to 25%. At the time of launch, GST brought tax rate reduction on large cars. The tax reduction has brought down the price of SUV’s. The council will now present the proposal before the president and issue a notification, once the president approves of the proposal.

With a nod of approval from the cabinet, the government can increase the cess rate on the SUV’s. A formal notification will be presented to the GST Council on 9/11’s GST meeting. The price of the SUV’s had been dropped after the tax rate reduction. Most of the SUV’s cut off the prices between ₹ 1 lakh and 3 lakh. A finance ministry which is led by finance minister Arun Jaitley has recommended cess hike up to 25% for the SUV’s and the luxury cars.

Once the GST law gets amended, the council will move forward to decide upon a date to increase the cess. In the pre GST era, the motor tax had been about 52 to 54%. Of this percentage, 2.5% cess has been included to Central Sales Tax. Against this, the after GST tax came up to 43%.

Mercedes Benz India has already warned the buyers that the scenario would go back to square one after the cess hike post-GST. So, the current market situation of the cars is – the large cars, mid sized cars, and hybrid cars attract 15% cess and 28% GST. Small petrol cars attract 1%. The small diesel cars attract 3% tax.

The cars manufacturers are yet to express their reactions regarding the cess hike.