On the other hand, the GST Council maintains the status quo on the categories like small cars, 13-seater, and hybrid vehicles, that means the effective tax remains the same.
A mid path has been taken by the council. This will not effect the festive demand. It is better than what was anticipated before said Abdul Majeed, Partner, PwC.
“I feel it’s a moderate move by the government, a bit of relief to the auto sector. With this decision, old level of tax has re-appears,” said Abhay Firodia, President, SIAM to a media channel.
Earlier mid-size car attracted 46.60 per cent tax before implementation of GST, which come down by 43 per cent that means the segment got a benefit of three per cent but the government has increased two per cent in the latest decision taken by the GST Council.
Nullifying the price reduction of mid-size cars.
“The taxes on this industry were already very high and we expected the unfulfilled potential of this segment to increase after the implementation of GST and rationalization of taxes. Even if the rumoured cess hike of 10% was not concluded, the prices will go up again, which is disappointing. We will need to study the impact of this hike on the buyer sentiment,” said Rahil Ansari, Head, Audi India.
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M.S Mani, Senior Director, Deloitte Haskins & Sells, commented, “The increase in the cess on most cars, excluding small and hybrid cars, was widely expected and would make the car manufacturers roll back some of the price reductions that they had announced after the onset of GST.”
While the big cars attracted 51.80 per cent tax before implementation of GST, which was come down by 43 per cent that means the segment got a benefit of seven percent but the government has increased to five percent. This means an effect of two percent in reduction of big cars price.
FADA president John K Paul calls the move an unfortunate, “The festival season is just around the corner we hope its implementation would wait till then. A six month study would’ve given a better idea wether the revenue increase was sufficient to tide over the drop in income.”
On the other hand, Rajan Wadhera, President Auto, M&M, said to a business channel: “The deicision will impact the demand of XUVs as it will see an increase of Rs 60,000-75,000. Over 15-20 per cent drop in the demand because of this.”
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Similarly, SUVs, which attracted 55.30 percent tax before implementation of GST, which was come down by 43 percent that means the segment got a benefit of 11 percent but the government has increased to seven percent. This means an effective of 4 percent in reduction in SUV price.
Roland Folger, MD & CEO, Mercedes−Benz India, on the recent GST Council’s decision on cess hike of large cars and SUVs. commented, “The decision to increase the cess yet again is 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 the price is going to hurt demand. It seems the contribution of the 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,” he added.