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.
Union Finance Minister Arun Jaitley, at a Cabinet briefing in New Delhi on Wednesday, said this decision was made on the basis of a recommendation of the GST Council.
Mr. Jaitley said the GST Council would decide on whether the cess should be raised, and to what level. Out of 12 categories of luxury vehicles, only two would 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. 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, he said.
The Revenue Secretary said it would only affect luxury cars that used to attract high excise duty of 27% or 30%. The intention was not to raise taxes on any other cars.
