Current cess charged on automobiles to be removed soon

The government will abolish additional cess on goods and services that have been included in the last three General Budgets – 2015-16, 2016-17 and 2017-18 in a bid to ease the rollout of the GST.

The government’s 17 indirect central and state levies will be replaced under GST. While most vehicle categories will come under a standard 28 percent tax rate, with a provision to separately levy an additional variable cess, depending on what category the vehicle falls in.

Segments that will benefit include Luxury Cars and SUVs, which are expected to become cheaper, while the impact on other segments will be marginal. Hybrid vehicles, surprisingly, will now fall under a higher tax bracket, the same as luxury cars, and don’t enjoy tax cuts like electric vehicles do. Electric vehicles fall under a lower tax bracket of 12 percent.

Through the Taxation Law Amendment Act 2017, cess on automobiles (Cars and Motorcycles) is no longer applied. The industry is getting ready for the new tax regime, and this move further strengthens the July 1 rollout of GST.