Luxury vehicle makers fume over cess hike on big cars, SUVs

New Delhi : Luxury automobile makers, Audi, Mercedes- Benz and JLR India today expressed disappointment over GST Council’s decision to hike cess on mid-sized and large cars and SUVs by up to 7 per cent saying it totally overlooked their contribution to the industry and economy.

Under the new rates fixed today, cess on mid-sized cars has been increased by 2 per cent, while on large cars it has been hiked by 5 per cent and that of the SUVs by 7 per cent. The council, however, kept rates on small cars and hybrid vehicles unchanged, which came into effect when GST was implemented in July.

Reacting to the hike in cess, Audi India Head Rahil Ansari said: “Even if the rumoured cess hike of 10 per cent 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”.

He further said the taxes on auto industry were already very high and “we expected the unfulfilled potential of this segment to increase after the implementation of GST and rationalisation of taxes”. Expressing similar views, Mercedes-Benz India MD & CEO, Roland Folger 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, volume wise luxury car contribution to the industry is very low, the value wise contribution is much higher and that has immense potential to grow even more in the future, had there been fair taxation, he said. “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,” Folger added.

On the impact on prices of vehicles, he said: “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”. Jaguar Land Rover India President and Managing Director Rohit Suri 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”.

Under the new rates, popular mid-sized cars like Honda City, Maruti Suzuki Ciaz petrol and the newly launched Hyundai Verna will see prices increase by 2 per cent. Similarly, luxury cars such as BMW 3, 5 and 7 series, Audi A3, A4, A6 and A8 along with Mercedes C Class, E Class and S Class will now be more expensive by 5 per cent.

On the other hand SUVs, starting from Scorpio and XUV500 from the stable of Mahinndra & Mahindra, Renault Duster, Toyota Fortuner to luxury ones like Land Rover Discovery, Audi Q3, Q5 and Q7, BMW X3 and X5, along with Mercedes GLA, GLC and GLS will all see prices going up by 7 per cent.

In the earlier approved rates, large cars with engine greater than 1,500 cc and SUVs with length more than 4 metres and engine greater than 1,500 cc attracted cess of 15 per cent. Hybrid vehicles also fall in the same category under GST.