GST Rollout: Luxury automakers oppose the 10% cess hike

Since its implementation on 1st July, 2017 through Pan-India — GST had benefited the automobile industry due to reduced taxes as compared to the outgoing law. This made the automakers relax the prices of their creations.

The global automakers were rejoiced to offer their customers with the benefits of GST with maximum tax at 43 per cent against the pre-existing 45 per cent.

Perhaps, recently it is being observed that the GST Council is planning to hike the cess tax per cent from the existing peak of 15 per cent to 25 per cent.

The new move will affect the cars ranging- more than four metres in length and higher than 1.5 litres of engine capacity. These cars will majorly be the ones belonging to the luxury and SUV segments.

Prominent automakers within the country including Toyota Kirloskar, Honda, and Mercedes-Benz India Pvt. Ltd. have staunchly opposed this move. Some of them have stated this move responsible for tarnishing the growth of automobile sector and the economy of the country as a whole. They also went on to say, the price hike on the luxury vehicles will affect the segment that caters to a niche market which is responsible for the 10 per cent revenue of these car manufacturers.

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The eminent luxury carmaker in India- Mercedes-Benz India Pvt. Ltd. said the move will hamper their plans of expansion under the ‘Make in India” programme banner which would create more jobs to support local manufacturing.

“The government has not been consulting industry at all on this particular issue. They just need to understand that businesses are not done this way,” said, Shekar Viswanathan, Vice-Chairman, Toyota Kirloskar Motor Pvt. Ltd.

The taxing reforms and GST Council’s amendments for the same were criticised as the quick and gradual shift in taxing will harm the market situation. It was also stated that at least a period of six months should be spent with one tax reform before making any amendments in the same.
According to the finance ministry statement, the GST Council is looking forward to hiking the peak cess per cent on luxury vehicles and SUVs because it considers, the currently-effective taxing reform with reduced taxes levied on luxury products; especially luxury vehicles will in-turn wear away the government revenue.

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To sum up, if at all the cess hike is to happen, it will only happen with amendments for the same. So, if someone is planning to buy a vehicle from the above-mentioned segments, the decision must be taken sooner; before the amendments happen.

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