The Indian governments recent roll-back on GST taxation on luxury cars and SUVs, adding a 25% cess to be paid under the new rule will negatively effect the growth of global models in India and could come in the way of automobile production, according to Honda. Honda Car India limited, said the move came as a big dissapointment and it will isolate India as a market forcing a bias towards small car said HCIL President and CEO Yoichiro Ueno after the announcement. He added to that saying However, the latest government move to increase the ceiling on the additional cess on automobiles from 15 per cent to 25 per cent on larger cars and SUVs, is a big disappointment," he said in a statement. Ueno further said: "Such a move will impact the growth of advanced global models in India and will isolate India as a market with too much bias towards small cars."
Currently, large cars and SUVs attract top GST rate of 28 per cent with a cess of 15 per cent. However, earlier this
month the GST Council approved a proposal to hike cess on them to 25 per cent. The Indian automobile industry is moving towards globalisation in emission norms and safety standards. But too much focus on small cars and the tax benefits to small carswill isolate India from the global automobile trends, he added. "If vehicles produced in India are very different from global trend, it will also impact the development of the Indian automobile industry. It makes export of both CBU vehicles and auto components more difficult and poses hurdles to India in the way of becoming global hub for automobile production," Ueno said.
A lot of models which are classified as entry segments in other countries are regarded as luxury models in India just
because it is over four meters in length, he added. Ueno also asked the government to re-consider high level of taxation on hybrid vehicles saying these are advanced and environment-friendly automobiles. "As per the new tax structure, hybrid vehicles will be taxed as per the conventional engine models. This will pose a fresh challenge to our intention to popularize this environment-friendly technology in India," he said. While the government has announced its commitment to electric vehicle (EV) technology and also extended it tax benefit under GST, its implementation will require significant infrastructure development over the next decade or so, Ueno
added. "We feel that support to HEV (hybrid electric vehicles) will make HEV more attractive to customers and prepare them for adopting EV technology till infrastructure is ready," he said.