GST: Modi govt approves hike in levy on luxury cars and SUVs; vehicle prices to go up soon

It looks like the surge in sales and reboots in the auto industry after Goods and Services Tax (GST) implementation is short-lived. The Narendra Modi government on Wednesday approved raising a levy on luxury cars and sports utility vehicles to 25 percent from 15 percent.

The new levy is in addition to taxes on the sale of luxury vehicles, reports Reuters. The move will see car makers increase prices of vehicles within a month after price cut implemented on reduced taxation with GST.

Under Goods and Services Tax (GST), luxury cars and SUVs tax rate is 28 percent with an additional cess of 15 percent thus taking the total to a whopping 43 percent. With the additional cess of 25 percent, the total tax will be around 53 percent which is more or less the same taxation on such vehicles in the pre-GST period.

On August 5, the GST Council had approved raising cess on SUVs, mid-sized, large and luxury cars that had become cheaper post GST rollout on July 1. Raising the cess requires an amendment to the schedule of section 8 of the GST (Compensation to a State) Act, 2017. Once the law is amended, the GST Council will decide on the date when the increased cess will be applicable.