Luxury vehicle firms lash out at govt on cess flip-flop

  • Luxury vehicle firms lash out at govt on cess flip-flop

Luxury vehicle firms lash out at govt on cess flip-flop

The joy for makers of sports utility vehicles (SUVs) and large cars will remain short-lived. The stocks of M&M and Tata Motors fell 1.3% and 1.07%, respectively, on Monday. Automobile companies have protested against the proposed increase and many may roll back price cuts announced after GST lowered the effective tax.

The Ministry of Finance in a statement said that decision to recommend a hike in the "maximum ceiling of cess" was taken at the Council's meeting on August 5. The offers include affordable EMIs starting at Rs 24,999, complimentary insurance for the first year, three years-service plan coupled with an additional two years of extended warranty, loans at an attractive 7.99 interest rate and exchange bonus of Rs 1 lakh. Currently, the levy on these vehicles, including the 28 per cent GST, adds up to 43 per cent, which will rise to 53 per cent once the law is amended.

According to media reports, the decision to readjust the cess has been taken so that the drop in price of luxury cars doesn't send out a wrong message that the recent tax reforms favour the rich.

Shocks and surprises have not abated for the domestic auto industry.

Analysts, however, said significant rate changes within a month after the GST was rolled out signalled that major rate adjustments could be on the cards for other items as well. "The decision on when to raise the actual cess leviable on the same will be taken by the GST Council in due course", it added. "The process of rate adjustments might continue", Satya Poddar, senior tax adviser at EY, told a TV channel. "As the leading luxury vehicle maker, this will also affect our future plans of expansion here", Roland Folger, managing director & chief executive of Mercedes-Benz India, said.

He said the move will hurt the growth of the luxury auto segment in the country.

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.

The State has demanded strong action to ensure that the Maximum Retail Price (MRP) of all goods is slashed while traders are introducing fresh stock to the market post-Goods and Service Tax (GST) regime, Finance Minister T.M. Thomas Isaac has said.

Toyota's portfolio in India mostly comprises cars such as the Innova Crysta, Corolla Altis, Fortuner, aCamry and super-luxury brand Lexus, would be affected. Ansari said the proposal to further increase cess would dampen the spirits of workers and employees, besides hitting companies, dealers, and customers.

Incidentally, the same tax slab also applies to mid-size cars (less than 4m in length) as well as hybrid vehicles, and vehicles with capacity of 10 to 13 persons.