Large, mid-size cars turn dearer

Automakers plan to pass on impact of cess hike to buyers

New Delhi : Automakers such as M&M, Toyota Kirloskar Motor, Audi, Mercedes-Benz and JLR India are planning to pass on the increased Cess on mid-sized and large cars along with SUVs, after the GST Council’s decision to raise it by up to seven per cent. The companies said the constant changes in rates could lead to market instability and affect demand growth trends, expressing disappointment that the Council's decision ‘totally overlooked’ their contribution to the industry and the economy.

Highlights:

• Mid-sized cars had 5% tax advantage. 2% Cess takes total GST to 45%
• Large cars had 8% tax advantage. 5% Cess takes total GST to 48%
• SUVs had 11% tax advantage. 7% Cess takes total GST to 50%

The increased GST Cess on mid- sized, luxury and SUV cars will come into effect from Monday. The GST Council on September 9 decided to hike Cess on mid-sized cars by 2 per cent, taking the effective GST rate to 45 per cent. Also, Cess on large cars has been hiked by 5 per cent, taking the total GST incidence to 48 per cent, while that of SUVs by 7 per cent to 50 per cent.

“Following the ordinance on the GST amendment, we note the increase in the Cess from 2-7 per cent on mid-, large- sized cars and SUVs. We see the prices of our products going up proportionately, which may nearly reflect the pre-GST scenario. However, we are ascertaining the real price impact on our models, given the cess hike,” Toyota Kirloskar Motor Vice-Chairman and Whole-time Director Shekar Viswanathan said in a statement.

“These constant changes could lead to market instability and thus dampen the spirits of the industry across the entire value chain,” Viswanathan added.

Mahindra and Mahindra MD Pawan Goenka said: “We’re awaiting the exact definition of the categories. Whatever is the impact of the increased Cess will reflect in the revised pricing from the effective date.” He further said: “We’re grateful that the Council has very thoughtfully not raised the Cess to the maximum level that had been enabled by the ordinance.”

The Council has basically restored pre-GST relative excise duty differentials between the various categories of vehicles. The hybrid vehicle Cess has not been increased, effectively giving these vehicles a 2-7 per cent Cess relief, he added.

According to BMW Group India President Vikram Pawah, while the company welcomes the implementation of the Goods and Service Tax (GST) in India, immediate changes and increase of motor vehicles Cess adversely affect stability and growth of the automotive industry in India.

Others like Audi, Mercedes-Benz and JLR India have also expressed disappointment over the GST Council's decision to hike cess on mid-sized and large cars and SUVs by up to seven per cent. Under the new rates, Cess on mid-sized cars has been increased by two percent, while on large cars, it has been hiked by five per cent and that of the SUVs by seven per cent.
The Council, however, kept rates on small cars and hybrid vehicles unchanged, which were approved when GST was implemented in July.

Reacting to the hike in cess, Audi India Head Rahil Ansari said: “Even if the rumoured Cass hike of 10 per cent was not concluded, the prices will go up again, which is disappointing. We will need to study the impact of this hike on the buyer sentiment.”

He further said the taxes on the auto industry are already very high and “we expected the unfulfilled potential of this segment to increase after the implementation of GST and rationalisation of taxes.”