New Delhi, August 7: Luxury vehicle manufacturers Monday hit out at the move to hike cess on large cars and SUVs to 25 per cent, saying it was against the spirit of liberal market dynamics and would affect future plans of expansion under ‘Make in India’ initiative.
Toyota Kirloskar Motor, Mercedes-Benz, Audi and BMW were unanimous that increase in cess on large, luxury cars and SUVs that had become cheaper after GST rollout would dampen the spirits of the industry across the entire value chain.
The companies also said a constant shift in policy makes long-term planning for the market highly risky, and it would only have an adverse impact on India’s financial ratings.
Under the current GST rates, SUVs, large and luxury cars attract top tax rate of 28 per cent with an additional 15 per cent cess.
“The message that we are getting from the government from such a move is that it is not looking at the auto sector to spur economic growth,” Toyota Kirloskar Motor Vice Chairman and Whole Time Director Shekar Viswanathan told PTI.
He further said increasing cess on large cars and SUVs will selectively benefit some companies, while putting others at a disadvantage.
Mercedes-Benz India MD and CEO Roland Folger said the company was highly disappointed with the move and it would be a strong deterrent to the growth of luxury cars in this country.
As a leading luxury car maker, this will also affect our future plans of expansion under ‘Make in India’ initiative, which aims at making and selling world-class products in India, with the latest technology for end-consumers, he said in a statement.
Expressing similar sentiments, Audi India Head Rahil Ansari said: “We will be forced to re-evaluate our business plans in light of this development. This move unfortunately is against the spirit of liberal market dynamics and we can only request to reconsider this proposal.”
This proposed increase in cess will most definitely adversely impact the sales, he added.
Companies such as Audi, Mercedes-Benz, Toyota had reduced prices on several of their luxury cars and SUVs by up to Rs 10 lakh passing on GST benefits to consumers. Ansari further said although the luxury car industry in India is small in volumes, it contributed over 10 per cent in value terms.
The proposal of further increasing the cess on the luxury car industry will dampen the spirits of not only the companies, dealers and customers but also workers and employees working in this industry, he added.
The taxes were already very high and the industry was expecting that the unfulfilled potential of this segment to increase after the implementation of GST and rationalization of taxes, Ansari added.
BMW Group India President Vikram Pawah also said that long-term stability in tax reforms and regulations are of paramount importance to foster growth of any industry in the country.
“While BMW Group India welcomes the implementation of the Goods and Service Tax (GST) in India, immediate changes and fluctuations on motor vehicles cess will adversely affect the stability and growth of the automotive industry in India.”
The finance ministry Monday said the GST Council has approved a proposal to hike cess on large cars and SUVs to 25 per cent from 15 per cent now. A decision on when to raise the actual cess leviable on the same will be taken by the GST Council in due course. Folger said the move once again reiterated the need for a long-term roadmap for the luxury car industry, which has been at the receiving end of arbitrary policies. PTI