All current cess on automobiles to be abolished

As per a notification by the Finance Ministry on June 7, 2017, Goods and Services Tax (GST) rollout has been further eased, with the government abolishing additional cess on goods and services that have been included in the last three General Budgets – 2015-16, 2016-17 and 2017-18.

GST is expected to replace as many as 17 indirect central and state levies. Under the new GST regime, most vehicle categories will come under a standard 28 percent tax rate, along with a provision to separately levy an additional variable cess on any vehicle category. Luxury cars and SUVs are expected to become cheaper, while the impact on other segments will be marginal. In a surprising move, hybrid vehicles will now come under a higher tax bracket – same as luxury cars – and will not enjoy any tax relief like that for electric vehicles which are placed in a lower tax bracket of 12 percent.

Through the Taxation Law Amendment Act 2017, cess on automobiles (cars and motorcycles) will no longer be applicable. This comes at a stage when the industry has started to gear up for the new tax regime, further strengthening the July 1 rollout of GST.