The Union Cabinet today approved the GST Council's proposal to hike the cess on mid-size cars, SUVs and luxury vehicles to 25% from an existing 15%. This 10% hike on cars will more or less bring back the cost of vehicles to what it was during the pre-GST era. While this ordinance by the government awaits its final clearance from Rashtrapati Bhawan, the hike has certainly united the automakers to protest against the government. The move to hike the cess has been referred as ‘damaging’ and will be a cause of the slowdown in domestic sales. Post the implementation of GST vehicles like Tata Hexa, Toyota Innova Crysta, Hyundai Tucson etc saw a price cut of almost Rs 1 lakh. The ten percent increase on cars will not be levied on sub-4-meter cars and SUVs, even the vehicles which are above 4 meters in length and less than Rs 20 lakh might just escape this additional cess, the government is yet to announce the criteria to levy this 25% cess on vehicles. We also expect top variants of Jeep Compass SUV that was launched last month to see a price hike by up to Rs 20,000-30,000. SUVs like Toyota Fortuner, Ford Endeavour will see a price hike by Rs. 4-5 lakh.
Imported cars like Jeep Grand Cherokee and Jeep Wrangler whose prices were reduced by about 9 lakh will again see revised pricing. Luxury sports cars including the likes of Porsches and Lamborghinis will also see a massive price hike. Most automakers will review the ordinance once it is approved and then will issue a statement but it is likely that these cars and SUVs will see a hike in price in the range of Rs 1 – 10 lakh.
Roland Folger, MD & CEO of Mercedes-Benz India said that this situation will go back to “square one” due to a levy of cess if the government does not intervene. He further added, "We have seen in India that if on the one hand something was given, then, on the other hand, something is taken back".
Rohit Suri, President and Managing Director, Jaguar Land Rover India in a statement said that “the GST implementation on 1st July removed the cascading impact of multiple taxes applicable in the pre-GST regime, which we understand was one of the primary objectives of the Government. The removal of the cascading impact enabled the Industry to reduce prices and benefit the consumer as well as expand the market, which had been declining because of high taxation. The expansion in demand would have enabled further investments in local manufacturing and job creation across the supply chain including more people in factories, showrooms, workshops, and logistics service providers. We earnestly hope that the Government and the GST Council will give due consideration to this matter and desist from raising the cess and putting a dampener on the positive momentum in demand that the industry had started to witness since 1st July.”
Audi India also has shared similar concerns on a hike in cess to 25%. Rahil Ansari the boss on Audi in India said “The luxury car industry in India, while small in volumes, still contributes over 10 percent in value. While the segment definitely needs more positive initiatives from the Government to be able to deliver a bigger contribution to the Indian economy, this scenario is clearly a setback.”