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Several automobile dealers have accumulated stock of cars in anticipation of the festive season sales, thus accumulating compensation credits as well in their books.
Compensation cess on cars has been abolished, with effect from September 22.
The removal of compensation cess on luxury cars is likely to hit automobile dealers by Rs 2,500 crore, as their compensation credits (CC) may be lapsed from September 22. The concern comes after the government decided to remove the compensation cess, while raising the GST on luxury and premium cars from 28% to 40%. Though the removal of the cess is beneficial for the customers, it is becoming a concern for car dealers, even as clarity on the issue is sought.
Several automobile dealers have accumulated stock of cars in anticipation of the festive season sales, thus accumulating compensation credits as well in their books. CC credits can be used to offset only CC liabilities.
As there is no CC from September 22 on cars, the accumulated cess will be lapsed.
Currently, mid-size and big cars attract 28% GST and compensation cess ranging from 17-22% with the overall tax incidence ranging from 45-50%. Now the GST rates once notified on these vehicles shall be 40% with no compensation cess.
FADA in its advisory on August 23 said dealers currently hold about 55 days’ worth of vehicle inventory.
FADA President C S Vigneshwar emphasised the need for clarity, saying, “One area that may needs earliest clarification is about levy and treatment of cess balances currently lying in dealers’ books, so that there is no ambiguity during transition.”
This is especially urgent as the festive season, a peak sales period, approaches, he added.
From September 22, petrol, CNG and LPG cars with engine capacity up to 1200cc and length up to 4000 mm will now attract 18% GST, lower from the earlier 28%. Diesel cars with engine capacity up to 1500cc and length up to 4000 mm also get the lower 18% GST rate.
Cars with engine capacity above 1200cc (petrol/CNG/LPG) or above 1500cc (diesel) or length more than 4000 mm will now attract a hefty 40% GST, as compared with 28% earlier.
Motorcycles up to 350cc engine capacity (including mopeds and scooters with auxiliary motors) will now attract 18% GST, down from 28%. However, Motorcycles above 350cc, including Royal Enfield 650cc, Harley-Davidson, or premium KTM models, will now attract 40% GST. So, premium bike enthusiasts will have to shell out more.
Three-wheelers (autos) also see GST reduced to 18%.
GST on electric vehicles remains the same at 5%. So, Ather, Ola Electric, TVS electric vehicle prices will remain the same.
Haris is Deputy News Editor (Business) at news18.com. He writes on various issues related to personal finance, markets, economy and companies. Having over a decade of experience in financial journalism, Haris h…Read More
Haris is Deputy News Editor (Business) at news18.com. He writes on various issues related to personal finance, markets, economy and companies. Having over a decade of experience in financial journalism, Haris h… Read More
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