Cess limit on motor vehicles raised to 25%: 

Cess limit on motor vehicles raised to 25%: 

Context:

The Goods and Services Tax Council (GST Council) , during its 20th meeting on Saturday, recommended that the Centre increase the maximum limit for the cess that can be levied on most motor vehicles from 15% to 25%.

Introduction:

• The reason for this, according to GST Council’s Fitment Committee, was that the post-GST tax incidence on motor vehicles across most categories was significantly lower than the pre-GST tax.

Recommendations:

• The GST Council recommended that the union government may move legislative amendments required for increase in the maximum ceiling of cess leviable on motor vehicles falling under headings 8702 and 8703, including SUVs, to 25% instead of the present 15%.
• However, the decision on when to raise the actual cess leviable on the same will be taken by the GST Council in due course.

Various Categories:

• Category 8702 comprise “motor vehicles for the transport of 10 or more persons, including the driver
• Category 8703 comprises “motor cars and other motor vehicles principally designed for the transport of persons (other than those of heading 8702) including station wagons and racing cares (other than cars for physically handicapped persons).

Key points:

• The GST Council argued that the hike in the cess was justified as it only brought the current tax incidence in line with what existed before GST.
• Net of 28% GST, to maintain the pre-GST tax incidence, the highest compensation cess rate required will be 26.5%, based on tax incidence estimated with reference to assessable estimated with reference to assessable value for exercise duty and dealer’s margin.