CBIC Notifies Increased Compensation Cess Rates applicable for Specified Motor Vehicles w.e.f. 11 Sept. 2017
In line with the recommendations of the 21st Meeting of the GST Council (dt. 9 Sept. 2017), the CBIC has issued Notification for increased compensation cess rates applicable on specified motor vehicles w.e.f. 11 Sept. 2017.
It may be noted that the GST Council has recommended moderate increase in rate of compensation cess on certain specified motor vehicles (SUVs/ Cars), as under:
i) Middle Segment Cars (engine capacity upto 1500 cc): cess rate increased from 15% to 17%;
ii) Large Segment Cars (engine capacity above 1500 cc except SUVs): cess rate increased from 15% to 20%; and
iii) Sports Utility Vehicles (SUVs) (length above 4000 mm + engine above 1500 cc + ground clearance 170 mm and above): cess rate increased from 15% to 22%.
For all other motor vehicles, there is no change in the rate of compensation cess and existing rates will continue to be applicable.
GST Council Recommends Increase in Maximum Ceiling of Compensation Cess Leviable on Motor Vehicles (Falling Under Headings 8702 and 8703) from 15% to 25%
The GST Council has recommended Central Govt to make legislative changes for increasing Maximum Ceiling of Compensation Cess Leviable on Motor Vehicles (Falling Under Headings 8702 and 8703) from 15% to 25%, as under:
The GST Council considered the issue of cess leviable on motor vehicles in its 20th meeting held on the 5th of August 2017 and recommended that Central Government may move legislative amendments required for increasing the maximum ceiling of cess leviable on motor vehicles falling under headings 8702 and 8703 including SUVs, to 25% instead of 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.
It was noted that after introduction of GST, the total tax incidence on motor vehicles [GST + Compensation Cess] has come down vis-a-vis the total tax incidence in pre-GST regime. The Schedule to the Goods and Service Tax (GST) (Compensation to State) Act 2017, specifies the maximum rate at which Goods and Service Tax Compensation Cess may be collected. In respect of motor vehicles, the maximum rate at which Goods and Service Tax Compensation Cess may be collected presently is 15%.