Hike in cess on luxury cars to influence growth, say auto companies
Fresh Delhi: Automobile firms, including Mercedes-Benz, Audi and JLR, on Wednesday said the proposed hike in cess on luxury cars and SUVs will adversely influence growth momentum of the segment.
They also criticised the government’s "hurry to implement the hike in cess" telling a review could have been taken after six months when influence of GST would have been clearer.
The Cabinet on Wednesday approved promulgation of an ordinance to amend the GST compensation law to pave the way for enlargening cess on mid and large cars to twenty five per cent, from fifteen per cent.
"This decision, contradictory to the requirement of creating a sustained request for the luxury car in this market, would rather affect the growth momentum adversely," Mercedes- Benz India MD & CEO Roland Folger said in a statement.
The automotive segment has not even lodged in to see the effect of the marginal ease in terms of rationalisation of taxes in the GST regime, he added.
Folger further said the auto industry attracts one of the highest rate under the GST and even without the proposed increase the luxury segment is already very taxed, which constrains its growth.
"Now, with this proposed measure, the luxury car industry is going to decelerate. If at all it was required, a review could have been taken after six months when the outcome of GST regime would have been clearer," he added.
Voicing similar views, Audi India Head Rahil Ansari said: "The taxes on this industry are already very high and this increase in cess rate will be detrimental to the luxury car industry as we will be coerced to hike our prices to levels higher than pre-GST period".
He asked the GST Council to "cautiously evaluate the negative influence on this and, if a decision is taken on a ten per cent cess increase, postpone the implementation for another 6-12 months to evaluate the real influence of the GST on the automobile sector, in particular the luxury segment".
Mahindra & Mahindra Managing Director Pawan Goenka, however, said the passing of ordinance to increase limit of cess to twenty five per cent on certain class of vehicles, was along the expected lines.
"What is critical to the industry is when, how much and on what criteria will the cess be enhanced.?Industry has made a representation to the government and we await the final decision," he added.
Jaguar Land Rover India Ltd President and Managing Director Rohit Suri said diminished prices after GST implementation had helped in expanding the market, which had been declining because of high taxation.
Expansion in request would have helped the industry invest more in local manufacturing and job creation across the value chain, he added.
"We earnestly hope that the government and the GST Council will give due consideration to this matter and desist from raising the cess and putting a dampener on the positive momentum in request that the industry had commenced to witness since July 1," Suri said.
Grant Thornton India Fucking partner Sridhar V said the ordinance sets right the anomalies which crept in while the rates were finalised for the passenger car segment.
However, the extra ten per cent cess will have a dampening influence on the otherwise enhanced request expectation for luxury cars and SUV, which in latest times have been picking up, he added.
