Hyundai Motor India top boss Y K Koo hit out at the frequent changes in tax rates on automobiles and went on to state that all the changes will have an adverse impact on the company’s investment for new products and technology in India considering that there is an absence of a long term policy. The auto industry has been through a lot in 2016-17 and it all started with demonetization, which affected sales and showroom footfalls drastically. Later on, in April 2017, the Government of India issued a ban on BS-III fuel and then in July this year, GST kicked in which was supposed to be a promising move for the industry.
While GST brought down car prices drastically and this saw sales go up which was a positive move for the industry, but just last week the GST Council decided to hike cess on mid- size cars by 2 per cent, on large cars by 5 per cent and on SUVs by 7 per cent to bring tax rates on these cars at pre-GST levels, which affected cars like the newly launched Hyundai Verna and even the Creta. Mr. Y K Koo, MD&CEO, Hyundai Motor India said, “Implementation of GST was to create single unified large market with simplified tax structure for auto industry. However the recent rolling back to multiple rates with Pre GST classification has come as a setback to industry shaking the confidence of Auto manufacturers.”
The reaction does not surprise us as luxury car maker Mercedes-Benz too has made some strong statements with regards to the increase in cess. Under the GST regime, cars attract the highest tax slab of 28 per cent and on top of that a cess is levied. As it now stands, the effective GST rate on mid-size cars will be 45 per cent, on large cars will be 48 per cent. The rate will be 50 per cent on SUVs which include cars with length exceeding 4000mm and having a ground clearance of 170mm and above. However, the cess on small petrol and diesel cars, hybrid cars and those carrying up to 13 passengers has not been raised.
The reason why car makers launch cars from the months of August right up to November is because of the festive season in the country and with buyers set to zero down upon their cars, the increase in cess will prove to be a dampner, a concern that was shared by Y K Koo when he said,“We expect the coming festive season will witness low customer sentiment on new purchase decision.”
