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Carmakers unhappy with hike in cess

Last Updated 08 August 2017, 19:57 IST
As the government hiked cess on luxury cars and SUVs, it led the industry towards a flutter of confusion, with some visibly not impressed with the move. Sports utlity vehicles, mid-sized, and large luxury cars, which had become cheaper post the rollout of GST on July 1, will cost more as the GST Council has approved a proposal to hike cess on them by 10%. Earlier, what invited a cess of 15%, will now see the same being increased to 25%.

With the new cess, almost all big SUVs would be hit, while any passenger vehicle of four metres and above, and 1,500 cc and above, could get affected. This could mean, in terms of SUVs, the price rise may be in the range of Rs 60,000 to Rs 7 lakh.

 Under the GST regime, cars attract the top tax rate of 28%, over and above which, a cess of 1-15% is levied to create a corpus to compensate states for loss of revenue from the new tax regime’s implementation.

Carmakers across the board are not very happy with the increased cess. According to Toyota Kirloskar Motor Vice Chairman and Whole-time Director Shekar Viswanathan, “The message that we’re getting from the government from such a move is that it is not looking at the auto sector to spur economic growth.”

Toyota’s portfolio in India mostly comprises cars such as the Innova Crysta, Corolla Altis, Fortuner, aCamry and super-luxury brand Lexus, would be affected.

Exchoing a similar sentiment, Mercedes-Benz India Managing Director and CEO Roland Folger stated, “As a leading luxury carmaker, this will affect our future plans of expansion under ‘Make in India’, which aims at making and selling world-class products in India, with the latest technology for end-consumers.”

Audi India Head Rahil Ansari said, “We will be forced to re-evaluate our business plans. This move unfortunately is against the spirit of liberal market dynamics, and we can only request to reconsider this proposal.”

However, experts mention that this move might be on expected lines. According to PriceWater House Partner Abdul Majeed, “The hike is on expected lines. Obviously all these vehicles became around 10% cheaper after GST. If you look at the earlier rates, with all taxes put together, it came to 53%, which changed to 43% with GST.”

“They want to maintain the pre-GST rate, which meant ‘smaller cars-lower taxes, higher cars-higher taxes’. Apart from smaller cars, the government is also likely to promote public transport, electrification and sahred mobility,” he said.
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(Published 08 August 2017, 19:57 IST)

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