New Delhi, October 13, 2017

Reduces levy to 65% of the applicable rate

The GST Council has softened the tax blow on vehicles purchased and leased prior to July 1, when the Goods and Services Tax (GST) system was introduced in the country.

It has now reduced the GST rate on such vehicles to 65 per cent of the applicable GST rate (including compensation cess). A back of the envelope calculation shows that the GST rate would now get lowered from a level of about 43 per cent (in most cases) to around 28 per cent.

Meanwhile, an official release said that the GST Council had at its meeting held on October 6 took several decisions to provide relief to old/existing leases of motor vehicles.

The decisions are: Leasing of vehicles purchased and leased prior to July 1, 2017 would attract GST at a rate equal to 65 per cent of the applicable GST rate (including compensation cess); Such vehicles when sold shall attract GST of 65 per cent of the applicable GST rate (including compensation cess); Sale of vehicles by a registered person who had procured the vehicle prior to July 1 and has not availed any input tax credits of central excise duty, VAT or any other taxes paid on such motor vehicles, would also be subject to 65 per cent of applicable GST rate (including compensation cess).

These rates would apply for a period of three years with effect from July 1, the release added.

Commenting on this development, M S Mani, Partner-GST, Deloitte India, said that while the reduced effective rate of 65 per cent (of the applicable GST + compensation cess rate) is welcome, it still falls short of the industry’s expectations as this is significantly higher than the erstwhile rates.

[The Hindu Business Line]