Cabinet approves ordinance to hike cess on luxury vehicles.

Johnson Cherian.

The Union Cabinet has approved an ordinance to raise the maximum compensation cess that can be levied on two categories of luxury vehicles from 15 % to 25%, over and above the GST rate.

The Union Finance Minister Arun Jaitley, during a cabinet briefing in New Delhi on Tuesday, said this decision was made on the basis of the GST Council recommendation.

Mr. Jaitley said that the GST council will decide on whether the cess should be raised, and to what level. Out of 12 categories of luxury vehicles, only two will be affected.

When asked why cess was being raised on luxury vehicles, Mr. Jaitley said that it had nothing to do with the quantum of GST collection. He added that the object of any taxation policy can’t be that its impact is such that a luxury item becomes cheaper and an essential item becomes more expensive.

The Revenue Secretary said it will only affect luxury cars that used to attract high excise duty of 27% or 30%. The intention is not to raise taxes on any other