SUVs to cost more: Luxury car firms lash out at govt on cess flip-flop

Most say they will review their Make in India plans as prices may top pre-GST level

Company News : Shocks and surprises have not abated for the domestic car industry. There was a short-lived euphoria after the goods and services tax (GST) roll-out lowered the levy on passenger vehicles, especially luxury cars and sports utility vehicles. Now the manufacturers are staring at a situation where prices could be higher than those in the pre-GST regime.

The GST Council has recommended an amendment to increase the cess on all passenger vehicles above four metres and with an engine capacity of 1,500 cc and above to a peak of 25 per cent, from 15 per cent now. Such vehicles currently attract a GST of 28 per cent and a 15 per cent cess.

The Centre will have to amend the Schedule to Section 8 of the GST (Compensation to States) Act, 2017, for this increase to take effect. The increase in cess would be finalised by the GST Council. The move adversely impacts M&M, Toyota, and luxury carmakers such as Mercedes, BMW, Audi, and JLR.

The decision has upset the growth plans of the luxury car industry, which had seen a flat performance in the 2016 calendar year, owing to demonetisation and the ban on 2,000-cc diesel cars in the National Capital Region for the first eight months of the year.

“This move unfortunately is against the spirit of liberal market dynamics,” said Rahil Ansari, head of Audi India. “This proposed increase in cess will most definitely adversely impact sales and we will be forced to re-evaluate our business plans.” Ansari said the proposal to further increase cess would dampen the spirits of workers and employees, besides hitting companies, dealers, and customers. M&M and Toyota did not comment on the development. A little over 30,000 luxury cars are sold in the domestic market every year and this forms just 1 per cent of the passenger vehicle market of 3 million units. Read more