By TNI Network
Date: Jun 30 , 2017

New Delhi: As per the latest Finance Ministry notification, motor vehicles for the transport of 10 or more persons, including the driver, will attract a services tax compensation cess of 15 per cent.

The government has decided to levy a cess of 15 per cent over and above the GST rate of 28 per cent on buses, thus putting public transport vehicles in the same tax bracket as luxury cars and hybrid vehicles.

The cess is likely to increase prices of buses and may hamper public transport, automobile makers said.

The 15 per cent cess is over and above peak rate of 28 per cent, thereby taking the overall tax incidence on such vehicles to 43 per cent. Such buses currently attract a total tax of 27.8 per cent.

Speaking on the move SIAM Director General Vishnu Mathur said "Government has been speaking about expanding public transport in the country to reduce air pollution. So by increasing tax on buses it is going against its own stated position," The need of the hour is public transport and higher tax would lead to rise in bus prices thus impacting demand, he added.

A spokesperson of leading commercial vehicle maker Ashok Leyland said: "Clarity has been sought on the subject which is brand agonistic. If this is true, the increase in the cost will impact all operators and the end users at large."

Earlier, the automakers had asked the government to lower tax on hybrid cars. The government, however, did not accept the demand.

The GST council has fixed 43 per cent tax (28 per cent GST plus 15 per cent cess) on hybrid cars, a rate that industry felt was too high for the fuel efficient vehicles.

The automakers in their demand to the GST Council had asked it to reduce the tax rate on hybrid vehicles to 18 per cent, arguing that they are much more efficient and eco- friendly but require scale and volume to become economically viable.

As per the proposed rates under the GST regime, hybrid vehicles have been put in the same category as big petrol and diesel luxury cars attracting 28 per cent rate with a cess of 15 per cent.

The tax incidence on hybrid vehicles will go up to 43 per cent from the current effective tax rate of 30.3 per cent. At present, hybrid vehicles attract excise duty of 12.5 per cent, similar to entry-level small cars such as Tata Nano or Maruti Alto.