Congrats, your ordinary sedan and SUV are now luxury cars!

Yes, all thanks to the Indian government. The cabinet just approved a 10 % additional cess on cars that measure longer than 4 meters. What this essentially means is, cars and SUVs such as the Hyundai Verna, Honda City, Mahindra Scorpio and the Tata Hexa will now be taxed at par with Audis, BMWs and Mercedes Benzs.

The total tax on these cars (after this additional cess) will be a whopping 53 %. This tax rate is similar to what these cars faced before GST was implemented. All-in-all, the price drops on mass market cars that we saw post-GST will soon reversed. The GST council is yet to decide on the exact date on which the new cess will come into force. The parliament will now have to first pass this cess as a law though.

Meanwhile, the additional cess is not just on cars that are longer than 4 meters. Even small cars will be hit. Small cars that measure under 4 meters in length, with petrol engines displacing less than 1.2 liters have been hit with an additional 1 % cess. Small cars that measure under 4 meters in length, with diesel engines displacing under 1.5 liters have been hit with an additional cess of 3 %.

Here’s a summary of old and new taxes on different categories of cars,

GST tax rates on cars before the cess:

Total tax on sub-4 meter (small) cars with petrol engines measuring less than 1,200 cc: 28 %

Total tax on sub-4 meter (small) cars with diesel engines measuring less than 1,500 cc: 28 %

Total tax on 4 meter+ (large) petrol and diesel cars: 43 % (28 % GST plus 15 % cess)

GST rates on cars after the cess:

Total tax on sub-4 meter (small) cars with petrol engines measuring less than 1,200 cc: 29 % (28 % GST plus 1 % cess)

Total tax on sub-4 meter (small) cars with diesel engines measuring less than 1,500 cc: 31 % (28 % GST plus 3 % cess)

Total tax on 4 meter+ (large) petrol and diesel cars: 53 % (28 % GST plus 25 % cess)

Via TheEconomicTimes