SUVs, large luxury vehicles and mid-sized cars in India were going to get expensive following a government recommendation to increase auto GST and cess on these vehicles. After deliberation, as on date, the levy as per government stands at an increased GST cess of up to 7 per cent on mid-size, large and SUV cars.
The initial proposal of 15 -25% cess hike saw the GST council, which includes both Union and State finance ministers set to increase this cess to 25%. This decision was taken following several complaints from states about prices of luxury vehicles coming down following the auto GST and cess implementation. The auto industry has been up in arms over this new dictate, and revised rates of cess are now mandated.
GST rate on mid-size cars is at 45 per cent, on large cars at 48 per cent, and for sports utility vehicles (SUVs) at 50 per cent. the latter slab includes cars with length exceeding 4,000mm and ground clearance of 170mm and above. Cess on small petrol and diesel cars is not raised. Small petrol cars with engine capacity less than 1200cc attract 1 per cent cess. Ddiesel cars with engine capacity of less than 1500cc attract 3 per cent cess, above the 28 per cent GST rate.
The new auto GST cess percentage announced by Arun Jaitley, Finance Minister with the GST Council having a final say in extent of increase, and the vehicle segment it affects came after a meeting held in Hyderabad on September 9. T
Society of Indian Automobile Manufacturers (SIAM) breathed a sigh of relief that GST Cess of 25% wasn’t imposed on larger cars. Under new GST Cess, tax on mid-sized passenger cars is almost restored to pre-GST levels. Tax on luxury cars and SUVs is slightly moderated compared to pre-GST rates. Tax slabs for auto industry stands increased as compared to the former Excise Duty structure.
Government looks forward to encourage hybrid vehicles (including mid, large and SUVs) through differential taxation at 15 per cent on hybrid cars. Taxation of 10-13 seater vehicles isn’t fully corrected and could have been fixed at a GST rate of 28% without any cess since they are public transport vehicles, and not for personal use. This need to be addressed. It’s hoped new cess rates are constant and not prone to frequent increases. Road taxes across states shouldn’t be hiked as states will receive increased compensation from revised cess.
Automakers view this policy flip flop as a damper where sales are concerned, specially with the onset of the festive season in the country. The hike will not only affect sales of luxury models from BMW, Audi, Jaguar and Mercedes Benz but will also have an impact on sales of vehicles falling in the premium category from Honda, Hyundai and Maruti Suzuki.
Toyota Kirloskar Motor hiked the price of Innova, Fortuner, Corolla and Etios effective from September 12, 2017 owing to raise in cess from 2-7% on mid-size to large size cars and SUVs, as amended by the GST Council. Approximate price increase in Delhi for Innova Crysta is upto Rs 78,000, All New Fortuner upto Rs 1,60,000, Corolla Altis upto Rs 72,000, and Platinum Etios upto Rs. 13,000. Hybrids and small car prices are unaffected post cess hike.
Honda Cars India Ltd. (HCIL) has announced a price increase of its cars – Honda City, Honda BR-V and Honda CR-V. Revised prices became effective from 11th September 2017 owing to additional compensation cess in auto GST. Price incraese across Honda variants ranges from Rs 7,003 – Rs 89,069. ISUZU mu-X and V-Cross model, post the revision of cess by the GST council on SUVs is as follows:
Mr. Roland Folger, MD & CEO, Mercedes?Benz India said, “The decision to increase the Cess yet again is very unfortunate and totally overlooks the contribution we make to the industry and to the economy. Though luxury car industry’s volume contribution is very low, our value wise contribution is much higher and that has immense potential to grow even more in the future, had there been fair taxation. However, by continuous taxation of the segment, the overall revenue generation is going to be hurt, as the increase in price is going to hurt demand. It seems the contribution of luxury car industry to the total PV market in India will remain constricted, though in the other developed economies, it is on a higher side and continues to rise gradually. With this increase in Cess now, the prices are bound to leap back to the pre-GST regime, in some cases higher than the pre-GST regime, thus negating altogether the benefits of GST regime.”
Rohit Suri, President and Managing Director, Jaguar Land Rover India Ltd said, While the increase in cess will impact consumer demand, investment and job creation, we are glad that the Government and GST Council took note of our concerns and somewhat moderated the increase in cess. Since the GST implementation on 1st July we were witnessing increase in demand for Jaguar and Land Rover brands and we are hopeful that this will continue in future as well.”