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Luxury Cars to cost more after hike in Luxury Car Cess


The Goods and Services Tax Council has come to a consensus on raising the cess levied on luxury cars from 15% to 25%. However, the new cess percentage can be implemented only after making an amendment in the GST Compensation Law which can take some time. Cars have been kept in the 28% slab under GST.

GST has replaced 17 Central and State Taxes and a total of 23 different cesses. The cess implemented is the additional amount that buyers need to pay on their purchase.

Currently, GST of 28% and a cess of 15% are levied on luxury cars which takes the total tax to 43%. The GST council had already set the maximum limit of taxes under GST including cesses at 40%. After the implementation of the new cess, a total of 53% tax would be charged from the buyers of luxury cars.
The additional cess is different for various car types. Small petrol cars below 4 metres in length and having engine capacity of up to 1200 cc attract 1% cess. Small diesel cars of up to 4 metres length and having the engine capacity of up to 1500 cc attract 3% cess. Mid-size cars having length more than 4 metres and an engine capacity of more than 1500 cc, large-size cars and SUVs currently attract 15% cess which will go up to 25%. However, no modification has been made in the tax levied on electric cars and they still remain at 12% GST.

Car-Segment Prior to Cess Increment Total Tax Post Cess Increment Total Tax
Small Petrol Cars (<4 metres and <1200 cc) 1% 29% 1% 29%
Small Diesel Cars (<4 metres and <1500 cc) 3% 31% 3% 31%
Mid-size Cars (>4 metres and >1500 cc) 15% 43% 25% 53%
Luxury Cars and SUVs 15% 43% 25% 53%
Electric Cars 12% 12% 12% 12%

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