The Lok Sabha has approved a bill to hike Cess on luxury vehicles from 15 per cent to 25 per cent. The Cess will be applicable along with the 28 per cent GST that is already applicable on cars that are over the 4-metre length category. In a statement, the Finance Minister Arun Jaitley said that the Cess on luxury cars has been increased in order to compensate states for revenue loss on account of implementation of the Goods and Services Tax or GST. This bill will now officially replace the ordinance, which was issued in September by the GST council that increased the GST on cars over the 4-metre length bracket.

(Lok Sabha issues Bill for GST Cess On Luxury Cars And SUVs)

The original ordinance that was issued by the council had multiple brackets, which resulted in Cess increasing 15 per cent to 17 or 20 per cent for cars and to 22 per cent for SUVs. As of now, this same taxation structure will continue to apply on cars and SUVs that fall in the 'luxury' category. The 25 per cent figure though has been thrown into the equation as a provision for future increases. This new bill though will not immediately affect any car prices as the updated GST rates have already been active since the GST council's announcement in September. That said, almost all automakers have already announced a price hike come January to offset the increase of commodity prices.

(Luxury Car GST Cess increase bill passed)

The new increase in the Cess bracket to 25 per cent for the future though will certainly affect the Indian luxury car market that has already seen a trying year in terms of overall sales. The introduction of GST has been appreciated by automakers but the constant change in Cess structures and the singling out of the Indian automotive industry for the highest Cess brackets will also affect future investments from automakers. We will continue brining you the latest updates and industry reactions to the increase in GST Cess right here on auto.ndtv.com.

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