India’s cabinet has approved raising the maximum levy on large cars, luxury cars and sports utility vehicles (SUVs).
According to the country’s Finance Minister Arun Jaitley, a panel of federal and state finance chiefs would decide on the timing of the increase.
The levy is part of a nationwide Goods and Services Tax (GST) launched last month to replace a multitude of provincial and national levies in the biggest tax reform in 70 years.
Under the new sales tax, vehicles are mainly taxed at 18 per cent or 28 per cent with an additional levy of 15 per cent on some types of cars.
The cabinet passed an executive order or ordinance, to raise the maximum levy to 25 per cent from 15 per cent, which could make large luxury cars and SUVs more expensive.
“The ordinance is only an enabling law. This does not mean the cess will automatically increase,” Jaitley said.
He said the GST council, comprising federal and state chiefs, will be “entitled” to take a decision on whether to increase the cess within the permissible limit of 25 per cent.
Any increase in taxes will impact luxury carmakers in India. Such cars include Daimler AG, Mercedes-Benz, BMW,
Audi, Volvo and Jaguar Land Rover, owned by Tata Motors as well as automakers such as Toyota Motors, Mahindra & Mahindra and Maruti Suzuki that sell SUVs.
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