CAR MANUFACTURING companies predict a dip in the sales of high-end vehicles in the upcoming festive season, after the increased Goods and Service Tax (GST) cess of up to 7 per cent on mid-size vehicles, large cars and SUVs. With the maximum hike on premium vehicles going up to Rs 4 lakh, some transport officials claimed consumers would be discouraged from making purchases. The GST Council on September 9 decided to hike cess on mid-size cars by 2 per cent, on large cars by 5 per cent and on SUVs by 7 per cent to bring tax rates on these cars to pre-GST levels. According to the new rules, cess on small petrol and diesel cars, hybrid cars and those carrying up to 13 passengers has not been raised.
“Implementation of GST was to create single unified large market with simplified tax structure for auto industry. However the recent rolling back to multiple rates with Pre GST classification has come as a set back to the industry shaking the confidence of Auto manufacturers,” an official statement from Hyundai Motor India Limited read.
Mid-size and high-end cars have seen a price hike between Rs 15,000 – Rs 4 lakh, depending upon their category. Car prices had dropped by up to Rs 3 lakh after the GST came into effect from July 1, as the new tax rates were lower than the combined central and state taxes in the pre-GST days.
“We expect the coming festive season will witness low customer sentiment on new purchase decision. Further in the absence of consistent and long term policy the investment for new products and new technology will be adversely impacted, “the statement from Hyundai read. A lot of buyers tend to book vehicles between Dussehra and Diwali, as this is considered an auspicious period for purchase.
Vikram Pawah, President of BMW Group India said: “We strongly believe that long term stability in tax reforms and regulations are of paramount importance to foster growth of any industry in the country. While BMW Group India welcomes the implementation of Goods and Service Tax (GST) in India, immediate changes and increase of motor vehicles cess adversely affect the stability and growth of the automotive industry in India.”
Others are more optimistic. “There will not be a dip in the sales as such because even after the increased cess, the overall taxation effectively matches the pre-GST regime. However, it is disappointing to see the sudden taxation variations in such a short span of time,” said Shubh Bansal, co-founder and CMO of Truebil, an online marketplace for pre-owned cars.
Consumers in the state were already greeted with a hike in one-tssime vehicle registration tax after the GST implementation in July on private two- and four-wheeler vehicles. “We have witnessed a hoarding tendency among consumers if prices of vehicles tend to increase after some period of time,”a senior regional transport official said.
Madan Lal, a consumer who ordered a Royal Enfield bike three months ago, claimed it would not affect him much. “It does not impact me a lot. As the increase is nominal, I can afford to spend some more,” he said. Another customer said the increase would affect buyers of premium cars. “The hike could affect buyers of high-end cars, who would have to pay loan instalments for few months more,” Shashank Srivastava, who plans to buy a car next year, said.